Housing Market Review 2015-2018 - The Housing Executive

Northern Ireland Housing Market

Review&

Perspectives

2015-2018

Contents

Contents List of Figures 4 List of Tables 5 Preface 8 Introduction 10 Executive Summary 11 Chapter 1 - The Strategic Context 21 Chapter 2 - The Owner Occupied Sector 55 Chapter 3 - The Private Rented Sector 75 Chapter 4 - The Social Housing Sector 93 Conclusion 124

Chapter

1

The Strategic Context

21

Northern Ireland’s Housing Market: Key Figures The Regional Development Strategy Housing Strategy for Northern Ireland The Economic Context Demographic Trends The Need for Social Housing Characteristics and Condition Energy Conservation and Fuel Poverty Key Issues and Strategic Perspective

22 23 24 27 33 38 42 47 52

Chapter

2

The Owner Occupied Sector

55

The Owner Occupied Sector: Key Figures 56 Introduction 57 New Housing 58 House Prices 60 Affordability in Northern Ireland 64 Repossessions 65 The Sale of Housing Executive Dwellings 70 Characteristics and Condition 71 Grant Aid for the Owner Occupied Sector 72 Key Issues and Strategic Perspective 73

2

Northern Ireland Housing Market Review & Perspectives 2015-2018

3

The Private Rented Sector

75

Contents

Chapter

The Private Rented Sector: Key Figures 76 Background 77 Characteristics and Condition 78 Performance of the Private Rental Market 79 Private Rented Sector Strategy 84 Reform of Housing Benefit 86 Key Issues and Strategic Perspective 89

Chapter

4

Social Housing

93

Social Housing: Key Figures 94 Introduction 95 Characteristics, Condition and Tenant Profile 96 The Housing Executive 107 The Housing Associations 108 Co-Ownership Housing 109 New Social Housing 111 Key Issues and Strategic Perspective 120

Conclusion Conclusion 124


3

Contents

List of Figures Figure 1: Quarter-on-Quarter Change in GDP, 2008-2015

29

Figure 2: Projected Population Growth by Local Government District, 2012-2037

37

Figure 3: Trends in the Waiting List, 2005-2015

38

Figure 4: Trends in Homelessness, 2004/05-2014/15

39

Figure 5: Unfitness in Northern Ireland by District Council, 2011

43

Figure 6: Decent Homes Standard in Northern Ireland by District Council, 2011

44

Figure 7: New Housing Construction in the Private Sector, 2004/05 – 2014/15

58

Figure 8: NI: Residential Property Sales, 2005-2014

59

Figure 9: NI: Average House Price, 2004-2014

61

Figure 10: NI: Proportion of Transactions by Price Band, 2004–2014

64

Figure 11: NI: Actions for Repossession, 2003/04-2013/14

65

Figure 12: Housing Executive Sales Completed, 2004/05-2014/15

70

Figure 13: Rental Transactions by Council Area (excluding Belfast), 2013-2014

82

Figure 14: Average Rent by Council Area (excluding Belfast), 2013-2014

83

Figure 15: Self-contained (occupied) Housing Executive and Housing Association Stock in Northern Ireland, 2004-2014

95

Figure 16: Co-Ownership: Annual Total Properties Managed, Purchasers and Staircasers, 2001/02-2013/14

109

Figure 17: Social Housing Re-lets and Allocations (excluding Transfers), 2003/04-2013/14 111

4


Table 1: Key Labour Market Statistics for Northern Ireland, 2014-2015

32

Table 2: Projected Households by Household Type, 2012-2022

35

Table 3: Projected Households by Household Size, 2012-2022

36

Table 4: Net Stock Model, 2011-2021

41

Table 5: Vacant Properties Analysis, 2011

46

Table 6: NI: Average House Prices and Annual Change by Property Type, Q4, 2014

61

Table 7: NI: Regional House Prices Q4, 2013-2014

62

Table 8: Repayment Affordability, 2010-2014

68

Table 9: Composite Index of Affordability, 2014

69

Contents

List of Tables

Table 10: Home Improvement Grants: 2007/08 – 2014/15, Approvals and Expenditure 72 Table 11: NI: Key Rental Statistics, 2013-2014

79

Table 12: NI: Properties Let by Property Type, 2013-2014

79

Table 13: NI: Average Monthly Rent by Property Type, 2013-2014

80

Table 14: NI: Properties Let by Number of Bedrooms, 2013-2014

80

Table 15: NI: Average Rent by Number of Bedrooms, 2013-2014

81

Table 16: Belfast: Key Rental Statistics, 2013-2014

81

Table 17: Belfast: Average Rent by Property Type, 2013-2014

81

Table 18: Council Areas (LGDs) outside BCCA: Key Rental Statistics, 2013-2014 82 Table 19: Housing Associations with 1,000+ Units of Rented Accommodation, March 2014 108 Table 20: Social Housing Development Programme Starts, 2005/06-2013/14


112

5

Preface

“The next three years will be challenging ones for all housing organisations.”

Preface

Preface It gives me great pleasure to once again present one of our most important annual publications: Northern Ireland Housing Market: Review and Perspectives, 2015-2018. We are going through a period of very significant change in the housing market, not least in its social sector. It is vital, therefore, that we have a comprehensive view of the main drivers of change and the key trends which provide the context for important policy and operational decisions. This document provides a strategic overview of developments in the housing market, highlights key issues to be addressed and the prospects for each of the tenures over the coming three year period. It is an integral part of our annual planning cycle which culminates in our Corporate Plan. The next three years will be very challenging. Northern Ireland’s economy has begun to show signs of economic recovery, but Government funding for housing will continue to be limited, an issue that is complicated by the lack of political agreement on the way forward in relation to welfare reform. The 2011 House Condition Survey did provide some welcome news during 2012, including a reduction in the headline fuel poverty rate from 44 per cent in 2009 to 42 per cent in 2011. Lower energy prices over the past year will have helped mitigate the impact of fuel poverty on households on lower incomes. More detailed analysis of the House Condition Survey data demonstrated the positive effects that well-targeted investment in housing can make, not only to the quality of the stock, but to its energy efficiency in particular, and therefore to people’s lives too. In social housing in particular, where thermal comfort had been an issue in a significant number of dwellings, heating and insulation improvements to some 20,000 properties between 2009 and 2011 saw the proportion of homes failing the Decent Homes Standard fall from 15 per cent to only four per cent. The major double glazing programme which has continued over the past three years will undoubtedly have further increased the energy efficiency of the Housing Executive’s stock. It is important, however, not to underestimate the need for ongoing investment in private sector housing too. The economic downturn took its toll on the ability of homeowners to improve and maintain their dwelling. The rate of unfitness in the stock rose for the first time in 2011 (to 4.6%), although the increase was primarily in vacant private stock. The issue of vacant properties is difficult to address at a time of limited financial incentives from Government to owners. The Housing Executive’s Empty Homes Unit is putting considerable resources into bringing empty homes back into use, but is often frustrated by lack of information, something which the Department for Social Development is addressing as part of the next Housing (Amendment) Bill.

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Preface

We are planning to undertake the next House Condition Survey in 2016 in line with our traditional five-year cycle. This will allow us to measure the impacts of continuing investment on the condition of the private and social stock, as well as providing up to date information on key Government measures, such as the Decent Home Standard, fuel poverty and energy efficiency, helping Government to better target scarce resources following the Comprehensive Spending Review. The issue of affordability for first-time buyers continues to be of importance as labour market uncertainty and falling real household incomes have continued to make it difficult for young households to enter the market The latest research produced in partnership with Ulster University, however, shows that house price to income ratios are now at much more sustainable levels, and access to lending has become easier (to date almost 1,000 first-time buyers in Northern Ireland have been given mortgages with the help of the Government’s Help to Buy Scheme) and despite house prices rising over the past two years there has been no significant deterioration in affordability as mortgage rates have remained competitive. Against this background the private rented sector will continue to play a very important role in Northern Ireland’s housing market. There is now a substantial evidence base on how the changes to Housing Benefit have impacted on tenants and landlords. So far research indicates that the impacts have been relatively small, but there is no doubt that the continuation of direct payment to landlords in Northern Ireland – an important difference from the rest of the UK – has helped sustain the private rented sector at a time when real household incomes are falling. Unlike in GB, social housing is benefiting enormously from the continuation of direct payment to landlords, although the ongoing uncertainty surrounding the implementation of the surplus room subsidy complicates forward planning. New figures in relation to the slower rate of household formation in Northern Ireland suggest that the number of new social dwellings built each year may have to be reduced. However, if this is the case there may well be additional resources available for the upgrading of Housing Executive stock, which has lost out in recent years as a result of the decline in capital receipts from house sales. The next three year period will undoubtedly see further significant change in the governance of social housing in Northern Ireland. It is important, however, that during these challenging times we do not lose sight of the importance of making the best use of scarce public resources for housing, and hope that this Review and Perspectives will be of benefit to everyone who is interested in making informed decisions in relation to the housing market.

Donald Hoodless Chairman


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Introduction

Introduction The “Northern Ireland Housing Market: Review and Perspectives” is a key strategic document published each year by the Housing Executive in its role as a focal point for the gathering and dissemination of market intelligence. It contains a range of housing market data, analysis and commentary which is designed to provide important background and contextual information for the development of housing strategies and housing policy as well as direct intervention in the housing market. This is the nineteenth consecutive year that the “Review and Perspectives” has been published. It draws together the latest statistics compiled by the Housing Executive, Government departments, universities and the private sector. Summaries of the key findings of recently completed housing research undertaken or commissioned by the Housing Executive are also included. In doing this, the document informs the Housing Executive’s Corporate and Business Plans, thereby helping to guide the organisation’s intervention in the housing market and providing an important means of monitoring the strategic impact of this intervention. Chapter 1 provides the strategic context for Northern Ireland’s housing market. It provides a overview of some strategic policy documents, before turning to examine the two most important drivers of the housing market: the economy and demography. It provides a summary of recent trends in the world economy, in the Eurozone and in the economies of the UK and Ireland as the broader context for understanding the most recent developments in Northern Ireland’s economy. It also provides a synthesis of the most recent socio-demographic trends emerging from the 2011 Census, trends which are often seen as having the most direct impact on developments in the housing market, before examining more direct indicators of housing need. Chapters 2 – 4 examine developments in each of the three main housing tenures: owner occupation, the private rented sector and social housing. The most recent statistics and trends are summarised as a basis for estimating how each of the tenures will develop in the coming three year period, in the context of the strategic factors set out in Chapter 1. Each chapter ends by highlighting the key issues emerging from the analysis and the strategic perspective. Finally, the short conclusion summarises the key trends and factors which will influence Northern Ireland’s housing market over the coming three years and highlights a number of important issues and priorities which emerge from the ‘Review and Perspectives’ as a whole.

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The Northern Ireland Housing Market: Review and Perspectives draws together the most up-to-date research and market intelligence in the form of a reference document for policy-makers and decision-makers in the public, private and voluntary sectors. Its aim is to help them make informed decisions in the context of both the key trends and developments in the housing market over the past twelve months and the prospects for the coming three-year period.

Executive Summary

Executive Summary

This summary of the document draws together the key issues facing the housing sector as a whole and each of its three tenures.

The Strategic Context The world economy appears to have entered a period of slightly lower growth reflecting, on the one hand, an acceleration in the advanced economies and on the other a slowdown in emerging markets and developing economies. Overall, the International Monetary Fund expects the world economy to grow by 3.5 per cent in 2015 and 3.8 per cent in 2016. In the advanced economies growth is projected to be stronger in 2015 compared to 2014, supported by lower oil prices, with the USA playing the most important role. However, growth is expected to be weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters. In the USA, economic recovery was stronger than expected during 2014, although there was a significant slowdown in the final quarter, and this lower rate of growth has continued into Q1, 2015. The main driver of this recovery was consumption which continued to benefit from an “accommodative monetary policy” and in turn steady job creation, income growth, lower oil prices and improved consumer confidence. However, labour participation levels continue to remain at the low levels (63%; 77% for the UK) last seen in the 1970s.


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Executive Summary

The euro area now accounts for approximately 17 per cent of world output. Its economy grew overall by 0.9 per cent in 2014, but this average disguises significant differences in performance. The German economy grew by 1.6 per cent, while the Italian economy contracted by 0.4 per cent. However, there were also indications of continuing recovery in early 2015, supported by lower oil prices, depreciation of the euro and the start of a 1.1 trillion euro programme of quantitative easing. Ongoing uncertainty surrounding the position of Greece in the euro area and the ramifications of a “Greek exit” as well as high levels of Government and household debt, still pose significant risks to the economies of the UK and the Republic of Ireland. In 2014, the UK economy grew by 2.6 per cent, the highest rate of all the leading G7 industrial economies and unemployment fell sharply. In March 2015, against this background, the Chancellor presented a fiscally neutral budget and reaffirmed the Government’s commitment to deficit reduction. The budget included a number of measures designed to boost housing supply, such as a 25 per cent top up for first time buyers saving for a deposit. However, the rate of economic growth dropped sharply in Q1, 2015 and ongoing low productivity, high levels of household debt and significant regional disparities will combine to make the Government’s aims of increased economic prosperity and a more balanced housing market more challenging. Northern Ireland’s economy grew by an estimated 1.8 per cent in 2014, and is set to grow by 1.7 per cent in 2015, but the pace of recovery is lagging significantly behind other parts of the UK, and Northern Ireland remains the poorest performing region. The rate of job creation has returned to pre-recession levels in 2013 and 2014 but “without any substantial growth in real wages, productivity or living standards” (PWC). During the first quarter of 2015, economic news has been mixed, with the level of new car registrations declining again, a significant rise in the rate of unemployment and the expectation of substantial reductions in public expenditure. In addition, the more than 60,000 households who continue to be in a position of negative equity must be seen as an ongoing drag on the Northern Ireland economy. Northern Ireland’s demography is continuing to change. Between 2001 and 2011, its population rose by 7.5 per cent to 1.8 million. Its age profile is becoming older: the number of people aged 65 and over increased by 40,400 (18%) and the number aged 85 and over rose by 35 per cent to 31,400. Average household size has continued to fall, although at a lower rate than previously envisaged. New, significantly lower household projections published by NISRA at the end of March 2015 have very important implications for housing need/demand and therefore supply. The impact of these new statistical estimates is currently the subject of research by the Housing Executive and the Department for Regional Development. The longer term trend towards more single person households and a greater number of older person households, however, will continue, resulting in a sustained demand for smaller accommodation. This demand is likely to be accelerated in the social sector if/when the spare room subsidy (more commonly known as the “bedroom tax”) is introduced. As the population continues to age, support packages funded by Supporting People will continue to play a vital role in helping older people, or people with a disability, to remain in their own homes for longer.

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The latest iteration of the Net Stock Model was completed in November 2014. It indicated an ongoing annual requirement of 1,500 new social dwellings for the period 2011 to 2021, reflecting both lower expected levels of household formation and a significantly lower rate of new construction for the private sector. The annual requirement has been set at 2,000 to reflect the significant under-provision relative to housing need which developed since 2001 and the challenging market conditions, which make it unlikely that there will be a significant upturn in the rate of construction by the private sector in the next three years. However, these figures are being reviewed in the light of the significantly lower rate of household formation which has become apparent since the sharp economic downturn in 2007/08.

Executive Summary

The numbers of applicants on the waiting list for social housing has continued to fall (to approximately 39,300 in March 2015) but the numbers in “housing stress” (more than 22,000) rose again over the past year. Both the number of households presenting annually as homeless and the number accepted as statutorily homeless rose in 2014/15; by 4% in the case of the former (to approximately 19,600) and by 14% to approximately 11,000 in the case of the latter.

Northern Ireland’s housing stock continued to grow steadily between 2009 and 2011, with approximately 20,000 additional homes being added to the stock. However, for the first time, the rate of unfitness increased: from 2.4 per cent in 2009 to 4.6 per cent in 2011. This increase is concentrated in private sector vacant stock, but lower disposable incomes as well as reduced funding for improvement and replacement grants during these two years has undoubtedly impacted on housing conditions. The rate of fuel poverty in Northern Ireland reduced between 2009 and 2011 to 42%, reflecting the considerable investment in energy efficiency measures in the social sector in particular. Estimates indicate that this figure rose again between 2011 and 2014, before falling back to 2011 levels following the sharp reduction in oil prices. Reducing fuel poverty continues to be a challenge, for even if energy prices remain relatively low, real household incomes have only recently started to show signs of rising again. Continued investment in improving the fabric of dwellings through measures such as more efficient heating systems and double glazing is important to ensure that a lower rate of fuel poverty is achievable.

The owner occupied sector Northern Ireland’s owner-occupied sector had grown steadily during the second half of the twentieth century and the early years of the new millennium. Government policies, including tax relief on mortgage interest, reductions in “bricks and mortar” subsidies for the construction of new social dwellings, rent increases in the social sector and in particular, after 1979, the generous discounts to tenants in the social sector wanting to purchase their home, had all helped to promote this trend. In the 2000s, low interest rates helped to counteract the growing gap between the income of the typical first-time buyers and rising house prices. However, the Global Financial Crisis of 2007/08 precipitated a ‘credit crunch’ and a concomitant steep economic downturn in Northern Ireland that ultimately led to a reversal of this longterm trend.


13

Executive Summary

Between 2006 and 2011, the proportion of the total housing stock in owner occupation fell from 66 to 62 per cent, although the number of dwellings in owner occupation remained approximately the same (almost 469,000). The relative decline of the sector was compounded by the sharp drop in the rate of construction of new dwellings for the private sector, from 14,000 in 2006/07 to an average of less than 5,000 per annum between 2008/09 and 2013/14. During 2013, there were signs that a more sustained housing market recovery was under way: more first time buyers were entering the market, assisted by the reemergence of higher loan-to-value mortgages, the growing demand (and funding) for Co-Ownership and schemes modelled on Help to Buy being run by a number of lenders. However, it is unlikely that the underlying patterns of tenure choice which have been established since 2007 will change over the next three-year period. Given the cautious outlook for Northern Ireland’s economy over the next three years, and the signs that the labour market is becoming more challenging in 2015, it is likely that the number of new dwellings being constructed in the private sector will continue to remain low, at around 5,000 per annum. This, combined with a greater propensity for younger households to remain in the private rented sector, will mean that the proportion of dwellings in the owner occupied sector will continue to decline. Average house prices in Northern Ireland are still more than 40 per cent lower than at their peak in 2007, but while figures from the leading house price indices for Northern Ireland all indicate that the marked increase in transaction rates which took place during 2013 continued into 2014, the number of homes being sold still remains significantly below pre-recession levels. The Ulster University mix adjusted House Price Index shows that house prices rose by 5.7 during 2014, and this rate of increase has persisted into Q1, 2015. This, combined with the brighter economic outlook, a shortage of new homes coming onto the market in many areas and a greater willingness on the part of lenders to provide higher loan-to-value mortgages for first time buyers, would indicate that prices are likely to continue to drift upwards by around 5 per cent during 2015, although once again there will be significant geographical variations. The Ulster University’s new composite index of affordability combines house price to income ratio for first time buyers and access to deposits. It confirms that affordability has improved significantly in recent years across most housing market areas and although the proportion of homes being sold at less than £100,000 is falling as prices rise, there has been no significant deterioration in levels of affordability. However, in a number of key housing market areas (Belfast and Lisburn & Castlereagh in particular) there remain stronger affordability pressures, and it is in these areas that lack of housing supply can be an important factor. This lack of supply is something which is currently being addressed by the Ministerial Housing Supply Forum.

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The private rented sector grew rapidly between 2006 and 2009, driven by both supply side factors, such as the investor-driven boom, and demand side factors, such as the demand from first time buyers unable to access owner occupation. The most recent House Condition Survey showed that the sector had continued to grow, albeit at a slower rate; by 2011 there were 125,400 occupied private rented properties in Northern Ireland and it was estimated that if vacant properties, which were privately rented when last occupied, are included, almost a fifth (19%; 144,500) of all housing stock is in the private rented sector. This ongoing growth of the sector is confirmed by 2013/14 figures from the Continuous Household Survey. High levels of worklessness and rising numbers in part-time and temporary employment, as well as substantial waiting lists for social housing and affordability issues for first time buyers, will ensure that the private rented sector will continue to play an increasingly important role in Northern Ireland’s housing market in the longer term.

Executive Summary

The private rented sector

Analysis of figures emerging from the private rental index developed in partnership with Ulster University shows an ongoing healthy demand for rental properties. The index shows that, in 2014, there were approximately 23,400 new lettings, but that the volume of transactions decreased by 11 per cent compared to 2013, providing a tentative indication of greater stability in the sector. Average monthly rent in 2014 for Northern Ireland as a whole was £549 (an increase of 2.0% compared to 2013), although this varied significantly by location. Belfast accounted for 41 per cent of the total new lettings and, at £595, the average rent in 2014 was significantly higher than for most other District Councils. Outside Belfast, the highest average rents were to be found in North Down (£627), Lisburn (£593) and Castlereagh (£587). Some landlords who have experienced mortgage repayment difficulties – particularly those who bought at the height of the boom with the help of a high loan-to-value mortgage – are leaving the sector. However, given the expected continued demand for private renting from first-time buyers unable to afford their first home, and the continuing pressure on the social housing budget, the risk of large-scale disinvestment is seen as low. Progress in implementing the Department’s strategy for the sector has continued. Nearly 6,000 landlords/letting agents have protected more than 30,000 deposits under the Tenancy Deposit Scheme introduced in April 2013 and more than 9,000 landlords have registered under the Landlord Registration Scheme introduced in February 2014. Both schemes will help contribute to a sector which is more attractive in the longer term for tenants and landlords and this issue is being examined further by the Review of the Private Rented Sector announced by the Department for Social Development in November 2014. In parallel, the Housing Executive has commissioned two further research studies, one focusing on the impact of the Tenancy Deposit Scheme and the other on the changing perspectives of landlords. Housing Benefit continues to play a vital role in supporting the sector. In 2013/14 more than 60,000 private tenants were in receipt of Housing Benefit and the total budget for the sector amounted to more than £300 million. Research completed


15

Executive Summary

by Sheffield Hallam University in 2013 indicates that the Housing Benefit Reforms have had a somewhat subdued impact, with little evidence of mass tenant/landlord movement out of the sector. Interim protections in place and the decision to retain direct Housing Benefit payments to landlords have softened the impact of current reforms. However, there are signs that tenants on lower incomes are having greater difficulty in finding the money to bridge the gap between Housing Benefit and market rent.

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Research undertaken by the Ulster University confirmed this growing affordability problem for tenants. In 2012, the average deposit was £415, much higher than in 2006 when the comparable figure was £348. In 2012, tenants had to pay an average shortfall between Housing Benefit and market rent of £29 per week, compared to only £20 in 2012. However, landlord-tenant relationships continue to remain generally positive, with more than 90 per cent of respondents stating that they were on good terms with their landlord. This research is to be updated in 2016 as part of the 2016 House Condition Survey.

In March 2014, the occupied, self-contained social rented sector accounted for 16 per cent of Northern Ireland’s occupied housing stock. Approximately 88,000 of these dwellings were owned and managed by the Housing Executive and 32,000 by housing associations, which also owned and managed an additional 4,200 units of accommodation that were not fully self-contained. The number of social dwellings in Northern Ireland is likely to continue to grow over the next three years, but at a slower rate. Reduced funding for the Social Housing Development Programme, planning constraints, and difficulties in securing land and support from local communities in appropriate locations, will combine to create a challenging environment as the Housing Executive and housing associations work, in partnership, towards a target of starting 1,500 new social dwellings in 2015/16.

Executive Summary

The social sector

The Housing Executive’s most recent estimate of future social housing need was completed in November 2014. It envisaged an annual requirement of 1,500 additional new social dwellings to meet ongoing need and an overall figure of a minimum of 2,000 new social dwellings in order to make significant inroads into the waiting list, which has risen substantially since 2001, and to take account of the relatively low rate of new private construction that is expected over the next three year period. New household projections showing a significant fall in the rate of household formation were published by NISRA in March 2015. These new figures are now being incorporated into a new version of the model to be published in the summer of 2015. Welfare Reforms that came into force in the rest of the UK during 2013 have yet to be fully implemented in Northern Ireland, but following the Conservative victory in the General Election in May 2015, there are already signs of increasing pressure on the Northern Ireland Executive to move forward on this issue. It is as yet unclear what level of protection for current and future tenants in the social sector will be applied. In the medium-term, however it is likely that the removal of the ‘spare room subsidy’ will lead to an increased demand for the limited stock of smaller properties. Work on the Social Housing Reform Programme is well under way. Already in 2015, the Department for Social Development has launched consultations on tenant participation and the regulatory framework for social housing providers. It is planned that further consultations will take place during 2015, paving the way for further developments in the reform programme that will shape the delivery of social housing in Northern Ireland in the future. The housing market and construction sector are still recovering from the property downturn in 2008. Many of those who responded to the consultations on the introduction of a developer contributions policy which were carried out during 2014 were of the view that, in these conditions, developer contributions would yield limited results. The Department for Social Development and Department of the Environment will give further consideration to the implementation and ramifications of developer contributions during the coming year. The Co-Ownership scheme continues to play a very important bridging role in meeting the needs of lower income households wishing to access owner-


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Executive Summary

occupancy. The public and private funding that has been committed to the scheme will help the organisation continue to fulfil its invaluable role in a challenging housing market.

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Reduced income from house sales has meant that capital improvement programmes to social housing have been significantly reduced in recent years. The lower rate of household formation, and in consequence a possible reduction in expenditure on new social housing, may enable additional resources to be made available for more substantial investment in the existing social housing stock.

Northern Ireland’s housing market is experiencing a gradual recovery. During 2014, the US economy experienced significant growth. The prospects for the economy of the UK also became significantly brighter. However, ongoing uncertainties and a weak labour market in the euro area, and a further period of austerity and limited increases in real wages in the UK, provide the wider context for the next threeyear period. Northern Ireland’s labour market improved substantially in 2014, but the significant rise in the rate of unemployment in early 2015 combined with the expected public expenditure constraints and the ongoing uncertainties surrounding the implementation of welfare reform will continue to provide a challenging economic context for the housing market. During the next three years the number of new homes being completed for the private sector is likely to remain well below the recent historic trend. House prices are likely to continue to gradually increase, reflecting low mortgage interest rates, and improved access to higher loan-to-value mortgages. However, the high levels of negative equity in Northern Ireland will continue to hamper the process of market recovery.

Executive Summary

Conclusion

The private rented sector will play an increasingly important role in meeting the needs of younger households on lower incomes, who in previous decades would have more likely become first-time buyers. High levels of demand for social housing in some areas will also continue to underpin the demand for private rented accommodation, which will continue to be supported by a large Housing Benefit budget. However, the impact of changes to the Housing Benefit system have so far been muted, in particular due to the continuation of direct payments to landlords, although recently completed research indicates higher deposits and a growing gap between Housing Benefit and market rent. Given the ongoing constraints on the public purse, resources for stimulating the housing market, for the construction of new social housing and investing in existing stock will be more limited, making decisions regarding housing policy, expenditure and intervention more challenging. Nevertheless it is important that the impact of scarce resources is maximised in the drive to meet the ongoing need for new social and affordable housing as well as improvement and maintenance of the existing stock and in particular its energy efficiency.


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Chapter

1

The Strategic Context “Ensuring access to decent, affordable, sustainable homes across all tenures ”


Northern Ireland’s Housing Market: Key Figures 2001

2006

2011

TOTAL STOCK

647,500

705,000

760,000

Urban

434,600 (67%)

493,800 (70%)

261,000 (34.3%)

Rural

212,900 (33%)

211,200 (30%)

230,300 (30.3%)

Owner Occupied

432,300 (67%)

468,900 (66.5%)

469,100 (61.7%)

Private Rented

49,400 (7.6%)

80,900 (11.5%)

125,400 (16.5%)

Housing Executive

116,000(17.9%)

93,400 (13.3%)

85,900 (11.3%)

Housing Association

17,900 (2.8%)

21,500 (3.1%)

24,800 (3.3%)

Vacant

31,900 (4.9%)

40,300 (5.7%)

54,700 (7.2%)

116,400 (18.0%)

113,800 (16.1%)

87,700 (11.5%)

356,800 (55.1%)

381,600 (54.2%)

371,600 (48.9%)

174,300 (27.0%)

209,600 (29.7%)

300,700 (39.6%)

TENURE

DWELLING AGE Pre-1919 1919-1980

1

Post 1980

HOUSING CONDITIONS Unfitness (rate)

31,600 (4.9%)

24,200 (3.4%)

35,200 (4.6%)

Non-Decent Home (rate)

205,800 (31.8%)

162,100 (23.0%)

86,600 (11.4%)

Fuel Poverty (rate)

167,100 (27.3%)

225,600 (34.2%)

294,200 (42%)

March 2001

March 2006

March 2011

Total Waiting List

22,054

32,215

39,891

Housing Stress

10,639

17,433

20,967

April 2000 – March 2001



Homeless: Presented 14,164

21,013

20,158

Homeless: Accepted

7,374

9,744

10,443

New Social Housing Required

1,500

2,500

2,000

NEED FOR SOCIAL HOUSING

The apparent increase in the number of dwellings constructed between 1919 and 1980 is essentially accounted for by sample error.

1

22


The Regional Development Strategy (RDS) for Northern Ireland, published in 2001 has played a key role in shaping Northern Ireland’s housing market. It has provided the overarching spatial planning framework which guided housing development. It emphasised the importance of decent housing, the availability of affordable and special needs housing as well as the need for balanced and integrated development and by acting as a brake on oversupply helped mitigate the adverse effects of the unsustainable housing boom between 2005 and 2007.


The Regional Development Strategy

This original Strategy envisaged a requirement for 160,000 additional dwellings during the period 1998-2015, a figure which was raised to 200,000 following the publication of new demographic and housing stock figures from the 2001 Census and the 2001 House Condition Survey respectively. Housing Growth Indicators (HGIs) were set for each of the District Council areas outside the Belfast Metropolitan Area (BMA) and for the BMA as a whole. Following a Public Examination in 2006 the overall Northern Ireland total was increased by 8,000 to 208,000 to take account of more recent population projections, and specifically the growing number of migrant workers. Following a fundamental review of the RDS, a new Regional Development Strategy – RDS 2035 – Building a Better Future was published in January 2012. As in the case of the original RDS, it provides “an overarching strategic planning framework to facilitate and guide the public and private sectors”2. Strategic Guidance contained in the new Strategy emphasises the need to “manage housing growth to achieve sustainable patterns of residential development” (p.40). It requires the varied needs of the whole community to be met, including the provision of affordable and special needs housing. It emphasises the need to manage housing growth to ensure a continuing focus on high quality accessible housing within existing urban areas and sets a regional target of 60 per cent of new housing to be located in appropriate “brownfield” sites within the urban footprints of settlements greater than 5,000. The overall requirement for new dwellings in Northern Ireland between 2008 and 2025 is estimated to be 190,000, an average annual figure of approximately 11,200, and is somewhat lower than the annual average of approximately 12,200 in the updated figures contained in the previous RDS. However, the key figure of190,000 dwellings was calculated using the 2008-based household projections, which – as became apparent following the publication of the Census 2011 figures – overestimated the actual number of households in Northern Ireland in 2011 by approximately 12,000. New household projections published by NISRA in March 2015 reflect a more subdued rate of household formation. The Department for Regional Development is currently in the process of revisiting the Housing Growth Indicators in the light of the new data which has become available. DRD (2012) Regional Development Strategy – RDS 2035 – Building a Better Future, Belfast: Department for Regional Development, p.10.

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23


Housing Strategy for Northern Ireland In 2012, the Department for Social Development (DSD) launched a consultation document: Facing the Future: Housing Strategy for Northern Ireland3. This document set out its vision for housing in Northern Ireland for the five year period 2012-2017 in the context of an economic downturn and recognised the significant role housing could play in helping to support and sustain economic recovery. The document envisages Government having three main roles in relation to housing: 1. Helping to create the right conditions for a stable and sustainable housing market that supports economic growth and prosperity. 2. Providing support for individuals and families to access housing, particularly the most vulnerable in society. 3. Setting minimum standards for the quality of new and existing homes and for how rented housing is managed. The strategy also envisaged housing playing a fourth role in driving regeneration within communities, particularly those suffering from blight and population decline. The strategy is organised into five themes, each of which subsume a number important tasks/commitments.

Theme 1 – Ensuring access to decent, affordable, sustainable homes across all tenures ➥➥ Help create the right conditions for a stable and sustainable housing market that supports economic growth and prosperity. ➥➥ Increase access to affordable housing. ➥➥ Develop further innovation in the funding of new social housing and make public funding work harder to increase supply. ➥➥ Maintain pathways into affordable housing for social housing tenants. ➥➥ Make the private rented sector a more attractive housing option by improving standards. ➥➥ Improve regulation of houses in multiple occupation. ➥➥ Improve the minimum standards for all housing stock and provide support to improve the poorest housing. ➥➥ Ensure social housing stock is maintained to a good standard. ➥➥ Improve the energy efficiency of all housing stock.

www.dsdni.gov.uk/housing-strategy-consultation.pdf

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➥➥ Undertake a fundamental review of social housing allocations policy to ensure that scarce public resources are used as effectively as possible. ➥➥ Make better use of existing social housing stock to meet a range of needs. ➥➥ Place a stronger policy emphasis on preventing homelessness. ➥➥ Support older and disabled people to live independently if they wish to do so.

Theme 3 – Housing and Welfare Reform ➥➥ Seek to implement Welfare Reform in Northern Ireland in a way that best reflects our circumstances making use of operational or policy flexibilities where available. ➥➥ Undertake research to better understand who will be affected by the housingrelated changes and how.


Theme 2 – Meeting housing needs and supporting the most vulnerable

➥➥ Put in place housing services that will provide support and assistance for those households impacted by welfare reform.

Theme 4 – Driving regeneration and sustaining communities through housing ➥➥ Bring more long-term empty homes back into use. ➥➥ Work collaboratively within DSD, across government and with local communities to address blight and reverse community decline through housingled regeneration. ➥➥ Support town and city centre regeneration through a revitalised Living over the Shops initiative. ➥➥ Tackle anti-social behaviour in housing more effectively. ➥➥ Use public funding for social housing creatively to generate additional employment and training opportunities, particularly for unemployed young people. ➥➥ Provide more opportunities for communities to choose to become shared communities where people of different backgrounds feel comfortable living together.

Theme 5 – Getting the structures right ➥➥ Put in place a sustainable housing system fit for the 21st century. ➥➥ Support business improvement in the social housing sector for the benefit of tenants and taxpayers. ➥➥ Transfer an agreed set of functions to district councils as part of local government reform.


25


Following the conclusion of the consultation process in December 2012, the Department for Social Development published an Action Plan for the Delivery of Facing the Future4 in which it committed to working towards five high-level outcomes: 1. Better housing management, with a more efficient and targeted use of resources. 2. Better regulation, with an increased focus on the interests of tenants and citizens, and reduced red tape. 3. Greater flexibility and responsiveness, as circumstances and market conditions change. 4. Continued fairness for citizens, regardless of tenure and consistent with the need to support those who are most vulnerable. 5. Implementing new structures that can support the above outcomes. This Action Plan reaffirmed a number of ongoing workstreams set out in the Programme for Government 2011-2015. ➥➥ PFG 28: deliver 8,000 social and affordable homes. ➥➥ PFG 29: introduce and support a range of initiatives aimed at reducing fuel poverty in Northern Ireland, including preventative interventions. ➥➥ PFG 30: improve thermal efficiency of Housing Executive stock and ensure full double glazing in its properties. ➥➥ PFG 81: by the end of 2014/15, to have implemented new structures to support the improved delivery of housing services to the citizens of Northern Ireland. A total of 33 specific actions were set out. The most significant for the housing market are set out below: ➥➥ Review the statutory fitness standard across all tenures. ➥➥ Review private rented sector regulation. ➥➥ Introduce a developer contribution scheme. ➥➥ Increase the supply of affordable housing by developing and launching a scheme to deliver affordable homes. ➥➥ Establish a Housing Supply Forum. ➥➥ Establish a working group that will identify ways of preventing or mitigating the impact of repossessions. ➥➥ Lead a fundamental review of social housing allocation policy. ➥➥ Review the Supporting People programme, including its policy and legislative framework. ➥➥ Increase the availability of smaller social housing units. ➥➥ Take forward an Empty Homes Strategy and implement an action plan. ➥➥ Take forward the Social Housing Reform Programme. Progress in relation to these actions will be examined as part of subsequent chapters. www.dsdni.gov.uk/facing-the-future-action-plan.pdf

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The World Economy Economic factors play a key role in determining housing market trends. The growing integration and interdependence of the world economy means that developments in the global economy, and in the most advanced economies in particular, are having an increasingly important impact on developments in the Northern Ireland housing market. Developments in the world economy are not only important because they provide export markets for local industry and therefore impact on employment and wage levels, they impact indirectly on the financial system and the propensity of banks / building societies to lend to potential homebuyers and investors. The International Monetary Fund’s (IMF) World Economic Outlook Update (April 2015) notes that the world economy grew by a modest 3.4 per cent in 2014, somewhat lower than the 3.7 per cent projected in January 2014. This reflected on the one hand an acceleration of growth in the advanced economies compared to 2013 and on the other a slowdown in emerging markets and developing economies, although the latter still accounted for three-quarters of global growth in 2014. The IMF highlights a complexity of interacting forces that are shaping the outlook for the world economy, including population aging and global shocks such as lower oil prices and legacy issues from the financial crisis. Overall, the IMF expects the world economy to grow by 3.5 per cent in 2015 and 3.8 per cent in 2016. Economic growth is projected to be stronger in the more advanced economies supported by lower oil prices, but weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters.


The Economic Context

In the USA, the IMF notes that economic recovery was stronger than expected, averaging approximately 4.0 per cent (annualised) in the last three quarters of 2014. The main driver of this recovery was consumption, which continued to benefit from an “accommodative monetary policy” and in turn steady job creation, income growth, lower oil prices and improved consumer confidence. Q1, 2015, however, saw the US economy shrink by 0.7 per cent, although this performance was affected by an extended period of harsh weather and the strength of the dollar. The rate of unemployment fell from 6.7 per cent in February 2014 to 5.5 per cent in February 2015, although the overall labour participation rate remained at around 63 per cent, the lowest since the 1970s. In response to a generally more positive economic environment, the US Federal Reserve ended its asset purchase scheme (Quantitative Easing) in October 2014. However, an ongoing rise in levels of household debt are a source of concern. Total household debt rose by $306 billion (2.7%) in the twelve months to $11.83 trillion5. Most of the increase and the total amount ($8.17 trillion) is accounted for by mortgage debt, but student loan debt ($1.16 trillion) is seen as a growing problem where repayment problems appear to be reducing the ability of borrowers to form their own households. The housing market, however, has continued to become more buoyant: the Standard & Poor – Case-Shiller index shows house prices rising by 4.1 per cent in the year to March 2015, although the rate of increase slowed in Q1, 2015. 5

Federal Reserve Bank of New York, Debt and Credit Report for Q4, 2014.


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In Japan, economic growth weakened considerably during the second half of 2014, and despite the Bank of Japan expanding its stimulus programme from 60 trillion yen to 80 trillion yen a year (the equivalent of 16 per cent of GDP) Japan slipped into another recession in Q3, 2014, when the economy shrank by 1.6 per cent. It pulled out of recession in the final quarter when the economy grew by 1.6 per cent, but the rebound was weaker than expected, reflecting the longer term effects of the increase in sales tax in the spring and underlining the challenges facing the Japanese government in its attempt to shake off two decades of stagnation. Overall growth in 2014 was close to zero, reflecting weak consumption and plummeting residential investment, although the IMF expects the Japanese economy to grow by 1.0 per cent in 2015. China, now the second largest economy in the world, grew by 7.4 per cent in 2014, the lowest increase since 1990. During the second half of the year a slump in the property market (a key driver over the past 10 years) and a decline in investment growth reflect what the IMF considers to be a move towards a more sustainable pattern of growth which is less reliant on investment. China’s total debt relative to GDP rose from 147 per cent in 2008 to 251 per cent in 2014 giving cause for some concern. The economy of the euro area grew by 0.9 per cent in 2014 and now accounts for approximately 17 per cent of world output. However, this disguises some significant differences in the performance of its biggest economies. The German economy grew by 1.6 per cent, while Italy’s shrank by 0.4 per cent. There were signs of recovery in Q1, 2015 as lower oil prices, lower interest rates and the depreciation of the euro all helped boost exports and consumption. The IMF forecasts that these factors will continue to stimulate growth and estimates that the euro economy as a whole will grow by 1.5 per cent in 2015 and by 1.6 per cent in 2016. March 2015 marked the start of an ECB programme of 1.1 trillion euros of “Quantitative Easing” designed to stave off deflation and boost economic growth, but the ECB estimates that unemployment in the euro area will remain above 10 per cent even after the Quantitative Easing has rippled through the economy. There is also ongoing uncertainty surrounding the position of Greece in the euro area. The Greek government is struggling to service the burden of its national debt which is equal to 177 per cent of GDP. The ramifications of a “Greek exit” must be seen as a significant risk to Europe’s economic stability. In the Republic of Ireland, the economy has continued to grow rapidly. In 2013, GDP had increased only marginally. However, during 2014 it rose by 4.8 per cent and is forecast to increase by a further 4.4 per cent in 20156. In tandem, the rate of unemployment has fallen from approximately 13 per cent in 2013 to 11.3 per cent in 2014 and in the spring of 2015 had fallen below 10 per cent, the lowest since 2009. The housing market in Ireland has also undergone a rapid recovery and in Q1, 2015 house prices increased at an average annualised rate of almost 15 per cent, helping to steadily reduce the percentage of mortgages in negative equity. Indeed the number of mortgages in negative equity has fallen by almost 50 per cent from its peak at the end of 2012 to 161,000 in 2014. However, this in turn has led to significant affordability issues in Dublin City and surrounding areas.

ESRI: Quarterly Economic Commentary, Summer 2015.

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The United Kingdom emerged from a deep economic recession in Q4, 2009. Recovery since then has been slower than previous downturns during the twentieth century, with a generally low rate of economic growth being punctuated by quarters of contraction (Figure 1). However, four consecutive quarters of economic growth were recorded in 2013, for the first time since before the “Great Recession” and in 2014 the economy grew by 2.6 per cent, the strongest annual growth since 2007 and the fastest of any of the G7 advanced industrial nations. Figure 1: Quarter-on-Quarter Change in GDP, 2008-2015 1.5 1.0 0.5


The UK economy

0.0 % -0.5 -1.0 -1.5

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

Q1 2010

Q4 2009

Q3 2009

Q2 2009

Q1 2009

Q4 2008

Q3 2008

Q2 2008

-2.5

Q1 2008

-2.0

Source: ONS

It was against this background that the Government announced another fiscally neutral budget and re-iterated its commitment to progressively achieving a reduction in the Government’s deficit7. Government debt as a share of GDP is set to fall in 2015/16, with public sector net borrowing falling from £90 billion in 2014/15 to £13 billion in 2017/18 before becoming a surplus in 2018/19. Public sector net debt as a proportion of GDP peaked in 2014/15 (80%) and is now forecast to decline to 72 per cent in 2019/20. At the end of 2014, employment was at its highest level ever recorded (30.9 million), more than 1 million above its pre-crisis peak and unemployment fell in every region compared to 2010. The employment rate was 73.2 per cent, the joint highest level since records began. The Office for Budget Responsibility (OBR) expects UK GDP to grow by 2.5 per cent (an increase of 0.1 per cent since the Autumn Statement) and by 2.3 per cent in 2016. Earnings increased by 2.1 per cent between Q4, 2013 and Q4, 2014, while lower fuel and food prices have boosted household incomes. The OBR forecasts imply that real household disposable incomes per capita are set to grow strongly for the rest of the decade. Budget 2015 sets out a number of measures that impact more directly on the housing market: ➥➥ Help to Buy ISA scheme: designed to help first time buyers save for a deposit on a new home. First time buyers can save up to £200 a month towards their

HM Treasury, Budget 2015 https://www.gov.uk/government/publications/budget-2015-documents

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new home in a special ISA account and Government will add 25 per cent to the amount saved on purchase of the first home (up to a maximum of £3,000). ➥➥ Budget 2015 notes that 217,000 affordable homes have been built since April 2010 and envisages a further 275,000 being provided in the five years from April 2015 to April 2020. ➥➥ Twenty Housing Zones will be designated outside London, doubling the number announced by the Chancellor in February 2015. Budget 2015 recognises that although economic recovery is taking place there is still a considerable way to go: “the deficit remains too high and productivity too low, there are still long-standing structural weaknesses in the economy, and the gap between the economic performance of London and the rest of the UK remains too wide” (p.1). In addition “the external risks facing the UK have increased since the Autumn Statement 2014, with continuing instability in the euro area and Ukraine” (p.2). Analysis of economic data for 2015 also indicates that prospects for 2015 may not be as forecast in the Budget. In May 2015, the Bank of England reduced its forecast for GDP to 2.5 per cent in 2015, following much weaker GDP growth of only 0.3 per cent for the first quarter, although it noted that unemployment has continued to fall (to 1.82 million), a seven-year low. Northern Ireland’s economy continues to grow, but at a significantly slower rate than the UK as a whole. The latest Northern Ireland Composite Economic Index for Q3, 2014 recorded a marginal increase of 0.1 per cent compared to Q3, 2013. The most recent overview of Northern Ireland’s economy from PwC (Northern Ireland Economic Outlook, April 2015) estimated that the Northern Ireland economy grew by around 1.8 per cent in 2014 (compared to 2.6 per cent for UK) and is set to grow by 1.7 per cent in 2015. However, PWC note that Northern Ireland remains the poorest performing region in the UK. It acknowledges that Northern Ireland’s rate of job creation has returned to pre-recession levels (24,000 additional jobs in the last 24 months), but “without any substantial growth in real wages, productivity or living standards”. Ulster University’s Economic Policy Centre’s Outlook for Spring 20158 estimated that GVA9 will grow by 1.9 per cent in 2015, but by only 1.1 per cent in 2016. Written after the Conservative election victory in May 2015, it notes that the central theme of its forecasts is one of austerity and its likely impact on growth. The Economic Policy Centre expects economic growth in the medium term to slow in Northern Ireland as the private sector moves to take up the slack created by lower Government spending. The announcement by the Chancellor in early June that Government spending in the UK was to be reduced by a further £3 billion and in consequence that Northern Ireland will lose a further £38 million from its Westminster allocation will exacerbate this challenging economic climate. During the first quarter of 2014 economic news has been mixed. New car registrations - often an important indicator of consumer confidence and purchasing power - rose in 2014 by 10 per cent in Northern Ireland (to approximately 57,000) compared to 2013. However, sales to May 2015 have fallen by 3 per cent compared to the same period last year, and there have been a series of job losses announced since the start of 2015, including at long established manufacturing companies: Japanese Tobacco International (Gallagher) in Ballymena and Bombardier in Belfast.

8 9

30

http://www.business.ulster.ac.uk/epc/docs/EPC/ GVA is similar to GDP but excludes the impact of taxes (including VAT) and subsidies.


Northern Ireland Budget 2015-16 The Northern Ireland Executive published its Budget 2015-16 on 19th January 2015 in the context of what the Minister of Finance and Personnel termed “challenging financial circumstances”, including a reduction in central Government funding of more than £1 billion since 2010. Agreed budget priorities include the protection of key frontline public services, investments that underpin economic growth and putting in place the foundations for the reform and restructuring of the public sector. The Chancellor’s Autumn Statement, announced in December 2014, gave Northern Ireland additional funding of £67 million of Resource DEL, £5.7 million of Capital DEL and £1.3 million of Financial Transactions Capital. However, in real terms the non ring-fenced portion of Resource DEL (£9.8 billion in 2015/16) represents a decline of 1.4 per cent. Capital DEL, in contrast was increased by 3.1 per cent to approximately £1.1 billion. The Stormont House Agreement provided for additional resources in 2015/16 of up to £380 million – for Shared and Integrated Education, a Voluntary Exit Scheme for the public sector, Capital projects and for bodies dealing with the past. It also committed the Northern Ireland Executive to paying the £114 million cost of not implementing welfare reform, giving the following Final Budget control totals: Non Ring-fenced Resource DEL £9,674 million, Ring-fenced Resource DEL £550 million, Conventional Capital £1,020 million and Financial Transactions Capital of £129 million.


Last year the mortgage administration company HML10 estimated that in Q4, 2013 more than 68,000 mortgages advanced since 2005 (41% of the total) were in negative equity. More recently Negative Equity NI estimated that 60,000 homeowners are still trapped in negative equity with an average shortfall of £68,000. Negative equity must be seen as an ongoing drag on Northern Ireland’s economy, a challenge which is compounded by the uncertainties surrounding Northern Ireland’s budgetary position.

The Department for Social Development’s opening Resource budget for 2015/16 is £90.6 million, but this represents a reduction of 9.7 per cent (£63.3 million) compared to the equivalent figure in 2014/15. Its proposed net Capital budget is £124.4 million. This is £12 million less than in 2014/15 and £103.9 million of receipts need to be realised to reflect the actual £228.3 million of capital spend managed by the Department. Against a background of a reduced budget the Department for Social Development is seeking to deliver services on a “business as usual” manner and protecting the most vulnerable, while progressing a major programme of reform in terms of welfare, housing and urban regeneration. In relation to housing the Department is seeking to strike an appropriate balance between the needs of new and existing tenants and sustaining investment designed to address fuel poverty. The maintenance of existing homes and the provision of new social housing continue to be key priorities. £98 million is being made available to fund 1,500 new social homes and £13 million for capital investment in existing Housing Executive stock. A further £10 million is being made available for around 300 affordable homes under CoOwnership. Affordable warmth and funding for disabled adaptations is to be maintained at 2014/15 levels and £3 million is being made available for housing led regeneration initiatives. At the time of publication, there has still been no resolution of the political differences over the implementation of Welfare Reform and the closely related ongoing budgetary discussions. 10

http://www.hml.co.uk/latest-thinking/2014/03bbc-negative-equity-report/


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Northern Ireland’s labour market The vibrancy of the labour market is an important factor in determining the buoyancy of the housing market. Key indicators include: employment, unemployment and economic inactivity. Rising levels of employment and increases in household income were key factors driving the buoyancy of Northern Ireland’s housing market between the mid1990s and the mid-2000s. Post 2007, however, the significant downturn in Northern Ireland’s economy was accompanied by a considerable increase in unemployment and worklessness. Table 1: Key Labour Market Statistics for Northern Ireland, 2014-2015 Q1, 2014 (000’s)

Q1, 2015 (000’s)

YoY Change

Economic activity (16-64)

852

(73.2%)

852

(73.1%)

-9,000

Employment (16+)

811

(67.5%)

832

(67.7%)

+21,000

63

(7.2%)

55

(6.2%)

-8,000

Economic Inactivity (16-64)

311

(26.8%)

313

(26.9%)

+2,000

Worklessness (16-64)

396

(34.0%)

386

(33.1%)

+10,000

Unemployment (16+)

Source: NISRA, Labour Market Statistics – March 2015 (Seasonally adjusted)

Table 1 compares the key labour market statistics for Q1, 2015 with the equivalent period in 2014: ➥➥ Employment (including employees, self-employed and those on government programmes) has increased by 21,000 to 832,000. This includes 195,000 parttime workers. The number of full-time workers has increased by 17,000 over the year. ➥➥ Unemployment decreased significantly over the year from 63,000 to 55,000 (6.2%). However, the rate of unemployment remains above the rate for the UK as a whole (5.5%) and two-thirds have been unemployed for more than a year. Compared to the previous quarter, however unemployment increased by 5,000. ➥➥ The number of people who were aged 16-64, but were economically inactive rose by 2,000 to 313,000 (26.9%). The UK average is 22 per cent and the Northern Ireland rate remains the highest of all UK regions. ➥➥ The number of people of working age who are workless (economically inactive plus unemployed) declined by 10,000 to 386,000. Approximately one third of the working population in Northern Ireland remains workless.

Earnings Northern Ireland continues to have a lower level of earnings than the UK as a whole. In April 2014 median gross weekly earnings for full-time employees was £457, approximately 88 per cent of the comparable figure for the UK as a whole (£518)11. Full-time earnings fell by -1.4 per cent over the year, compared to a 0.1 per cent increase in the UK as a whole.

11

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Annual Survey of Hours and Earnings (ASHE), : NISRA, Monthly Labour Market Report – May 2015


Census 2011 The 2011 Census continues to be a vital source of information for reviewing recent demographic trends as well as providing the basis for population projections, but also for the household projections, which are fundamental to any estimates of the future need and demand for housing in Northern Ireland. Key points which have emerged from a comparative analysis of the 2001 and 2011 Census figures include: ➥➥ In 2011, Northern Ireland’s total population was approximately 1,811,000. Since 2001 the population has increased by 125,600 (7.5%), representing the fastest growth in population between consecutive Censuses since the 1960s.


Demographic Trends

➥➥ The age structure of the population has continued to become older since 2001 and the median age has increased from 34 to 37 years. ➥➥ The number of people aged 65 and over increased by 40,400 (18%) and the proportion of the total population aged 65 and over increased from 13 to 15 per cent; the number of people aged 85 and over has risen from 23,300 to 31,400 – an increase of 35 per cent. ➥➥ Conversely the number of children (people aged under 16) has declined from 398,100 to 379,300 (-5%). In 2011, children aged under 16 constituted 21 per cent of the population – a reduction from 24 per cent in 2001. The statistics that have emerged from the 2011 Census over the last three years have provided key data for the research project commissioned by the Housing Executive, entitled Demographic Trends and Future Housing Need in Northern Ireland. The final report based on the research was published in February 2015 and highlighted a range of developments in Northern Ireland’s demography and estimated their impact on the housing market. The analysis contained in the report showed that there was both continuity and change in underlying trends. The key trends summarised above all represented a continuation of developments which had been correctly foreseen by demographers based on analysis of the previous intercensal period (1991-2001). However the report points out that in the case of some trends, there was a marked slowdown in the rate of change: ➥➥ Average household size fell (from 2.65 in 2001 to 2.54 in 2011), but at a slower rate than before. ➥➥ The number of households grew by 12 per cent (from 628,400 in 2001 to 703,300 in 2011), but the rate of growth slowed relative to the overall population. ➥➥ The number of single person households grew from 172,000 (27%) to 196,400 (28%), but again the rate of growth had slowed considerably compared to the previous intercensal period (1991-2001). ➥➥ The number of lone parent households with dependent children increased by 27 per cent from 50,500 (8%) in 2001 to 63,900 (9%) in 2011, once again a much lower rate of growth.


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Finally, the report highlights a number of key demographic trends which reversed between 2001 and 2011: ➥➥ The number and proportion of households with non-dependent children started to increase again, as the trend for adult children to leave the family home permanently was reversed (the so-called ‘boomerang’ kids) and indeed accelerated with the onset of the sharp economic downturn in 2008. Indeed Northern Ireland has the highest proportion of young adults living with their parents (36%) of any UK region (UK average: 26%). ➥➥ A slight reversal of the pattern of falling birth rates after 2008, implying that natural increase will be sustained during the period 2011-2021. ➥➥ A new dynamic of migration with a shift from overall loss to gain. Between 2003 and 2008 there was a net increase in in-migration of approximately 38,000, mainly from countries which had recently joined the EU. Although since 2009, again following the onset of the recession, this has returned to a pattern of out-migration. Migration patterns show concentrations of migrant workers in distinct geographical areas (e.g. Dungannon – where food processing and light engineering provided employment opportunities).

Regional Differences Demographic trends at the Northern Ireland level are important for understanding the dynamics of the housing market as a whole, but for the purposes of planning for housing, analysis of local trends is important. Key statistics for each of the 26 Local Government Districts (LGDs) provide an indication of the importance of modifying the Northern Ireland picture to take account of local developments. While the population of every LGD increased in the decade to 2011, the rate of growth varied considerably. It was greatest in Dungannon (21%), Banbridge (17%) and Ballymoney (16%) and lowest in Belfast (1.3%) and Castlereagh (1.1%). The overall fall in the number of children between 2001 and 2011 (4.7%) masks significant differences between LGDs. Some of the largest proportionate reductions are in the main urban centres, Belfast City: -13%; Castlereagh and Derry City both also experienced reductions of more than -10%, but there were also significant declines in Limavady (-13%) and Strabane (-11%). However, seven LGDs recorded more children in 2011 than in 2001; the largest proportionate increases were in Banbridge (11%) and Dungannon (9%). Similarly, there were significant local differences in the proportionate increases in the number of people aged 65 and over. The overall increase for Northern Ireland was 18 per cent, but some LGDs recorded much higher rates of increase: Antrim (38%) and Limavady (34%). The smallest increase was recorded in Castlereagh (8%) while Belfast City actually experienced a decline (-3%). In terms of the proportion of the population of each LGD aged 65 and over, North Down and Castlereagh had the highest (18%). The lowest proportions were in Derry City, Dungannon, Magherafelt and Newry & Mourne (all 12%).

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The first population projections based on the 2011 Census were published in June 2013. Between July 2011 and June 2012, the number of people living in Northern Ireland increased by an estimated 9,300 (0.5%). This was due to a natural growth of 11,100, offset by net out-migration of 1,800 (including 500 members of the armed forces stationed in Northern Ireland). The size of Northern Ireland’s resident population in June 2012 was estimated to be 1,824,000. Between 2011 and 2012 the number of persons aged 65 and over continued to increase (by 2.7%), while the number aged 85 and over increased by 3 per cent to 32,700.

Household Projections While population projections are an important source of information on the level and location of future housing requirements, it is the rate of household formation that is the more important driver of the housing market. The most recent NISRA household projections were published on 26 March 2015. The previous 2008-based projections had applied the trends in household formation which had been evident between 1991 and 2001. The new 2012-based projections are based on the trends in household formation which became apparent during the period 2001 to 2011. They take as their point of departure the 2011 Census results, updated by the 2012 mid-year population estimates and apply the most recent evidence on trends in household formation to the most recent population projections. It is important to note, however, that these projections do not attempt to predict the impact that future government policies (such as welfare reform) or changing economic circumstances might have on household formation. Nevertheless they do provide a robust estimate of the future number, size and type of households in Northern Ireland and must be seen as a key starting point for estimates of the future need and demand for housing in the private and social sectors.


Population Projections

Set out below are the most important findings for the 10-year period (2012-2022), from the point of view of Northern Ireland’s housing market and comparisons, where appropriate, to the previous 2008-2018 projections on which the most recent Housing Growth Indicators (see p.23) and the Net Stock Model (see p. 41) had been based. The overall number of households is forecast to increase from approximately 708,600 in 2012 to 752,900 in 2022, an increase of 44,300 (6.3%), giving an annual average increase in the number of households of 4,400. This means that compared to the 2008-2018 forecast (which envisaged 8,300 additional households being formed each year and could not have taken the effects of the unexpectedly sharp economic downturn into its analysis) the rate of household formation has almost halved. Table 2: Projected Households by Household Type, 2012-2022 Household type

2012

2022 % Change

One adult households

197,648

212,998

+7.8

Two adults without children

189,845

209,226

+10.2

Other households without children

108,197

108,211

0

One adult households with children

45,457

47,431

+4.3

Other households with children

167,456

174,990

+4.5

Total households

708,603

752,856

+6.2

Source: NISRA: Northern Ireland Household Projections (2012-based)


35


Table 2 shows that households comprising one adult or two adults without children are the fastest growing household types (increasing by 8 per cent and 10 per cent respectively over the ten year period). Indeed by 2037 these two household types are projected to account for three-fifths (60%) of all households in broadly equal proportions. People aged 65 and over account for approximately 37,000 (87%) of the 42,600 increase in people living alone between 2012 and 2037. By 2037, people aged 65 and over are projected to account for almost half (49%) of all those living in one adult households without children. The number of two adult households without children is projected to grow even faster than that of one adult households. The projected large growth in the population aged 65 and over is amplified by the projected increasing tendency to live in two adult households. This is a direct result of projected improvements in life expectancy, making it more likely for couples to grow old together for longer. In contrast there is a projected decrease in the tendency for older people to live in one adult households, however this is outweighed by the projected population growth of this age group. The number of households with children is projected to increase between 2012 and 2022 by 9,500, but is subsequently projected to fall by 8 per cent by 2037. Average household size is expected to fall marginally from 2.54 in 2012 to 2.52 in 2022. However, this reduction in average household size is less than envisaged in the 2008-based projections which forecast that by 2022 average household size would be 2.37. Nevertheless most of the additional households which are forecast to form between 2012 and 2022 are small households: almost half (46%) of the total (44,300) are forecast to be two person households and a further 35 per cent one person households (Table 3). Table 3: Projected Households by Household Size, 2012-2022 Household size

2012

2022

% Change

1 person

197,648

212,998

+7.8

2 persons

214,750

235,082

+9.5

3 persons

118,532

120,684

+1.8

4 persons

103,721

107,051

+3.2

73,952

77,041

+4.2

708,603

752,856

+6.2

2.54

2.52

5+ persons All households Av. H’hold size

Source: NISRA: Northern Ireland Household Projections (2012-based)

Each of the 11 new Local Government Districts is projected to have a growing number of households between 2012 and 2037, but the rates of growth vary quite considerably. Figure 2 shows that the highest rates of growth are forecast to occur in the more southerly councils. It is estimated that the highest rates of increase will take place in Mid Ulster (27%) and Armagh, Banbridge & Craigavon (26%). The lowest rates of increase are forecast to occur in Mid & East Antrim, Derry & Strabane, North Down & Ards, Belfast and Causeway Coast and Glens – all around eight per cent.

36


20%


Figure 2: Projected Population Growth by Local Government District, 2012-2037

Source NISRA: Northern Ireland Household Projections (2012-based)

Key Implications The key implications of the demographic trends are as follows: The lower rate of household formation will mean that the need/demand for housing is lower than envisaged by the Housing Growth Indicators contained in the current Regional Development Strategy and this will have a knock-on effect on the need for social housing too. The increasing number and proportion of one and two person households will have a limited impact on the size and design of dwellings as households often require an extra bedroom as a place of work or recreation. However, the ongoing programme of Welfare Reform will lead to an increase in the rate of growth of demand for smaller accommodation in the private rented and social sectors. The ongoing increase in the number and proportion of people aged 65 or more, and in particular the rapid growth in the number of people aged 85 or more, undoubtedly will have a significant impact not only on the design of dwellings, but also on the need for housing support funding and care packages which enable older people to live independently in their own homes.


37


The Need for Social Housing The Waiting List for Social Housing The Waiting List for social housing is a vital source of information for estimating the need for social housing in Northern Ireland. Longer term trends in the waiting list provide clear indications of growing or reducing pressure in the housing market as a whole and local data forms a key part of the evidence base which guides the Social Housing Development Programme in terms of the location and mix of new social and affordable dwellings to be constructed. Figure 3: Trends in the Waiting List, 2005-2015 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Source: NIHE

Total Waiting List

Total Housing Stress

Figure 3 illustrates trends in the overall waiting list for social housing between 2005 and 2015. Analysis of the figures shows that the overall number of applicants increased substantially between March 2005, when it was approximately 29,600, and March 2008, when it reached almost 39,700. Between March 2008 and March 2010 the number of applicants decreased a little – a reflection of the lower rate of household formation brought on by the sharp economic downturn and an increase in the availability of dwellings in the private rented sector – before rising to an alltime peak of approximately 41,350 in March 2013. Since then the waiting list has declined to approximately 39,500 in March 2015, reflecting a variety of factors, including a higher rate of construction of new social homes and a more challenging economic environment for many households to set up home. More recently changes in working practices in the management of social housing through the introduction of a “Housing Solutions” approach, which helps guide applicants to other housing options, such as in the private rented sector - rather than joining the waiting list for a location where there is high demand for social housing and where the chances of being housed are low - will in the course of time help reduce the overall waiting list further. A similar pattern is evident in terms of the number of households in housing stress. Between March 2005 and March 2008 the number of applicants in housing stress

38


The household composition of the waiting list has changed little in recent years. Single person households continue to be the single largest group (46%). Small families continue to be the next largest component of the waiting list (26%), followed by older households (16%). It is expected that future demand will come predominantly from these types of households.

Homelessness Figure 4: Trends in Homelessness, 2004/05-2014/15


rose from around 13,400 to 21,400. By March 2011, however, this number had fallen to approximately 19,700, before rising again to more than 22,400 in March 2013. In March 2014 the figure stood at approximately 21,000, but in contrast to the overall waiting list the number in housing stress rose last year to stand at more than 22,000 in March 2015.

25000 20000 15000 10000 5000 0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Numbers presenting

Numbers Awarded Priority Status

Source: NIHE

Between 2004/05 and 2006/07, there was a substantial increase (21%) in the number of households presenting as homeless (Figure 4). However, by 2008/09 the number of households presenting had fallen from a peak of more than 21,000 to around 18,000. As in the case of the waiting list as a whole, qualitative evidence would indicate that the two main reasons for this downward trend were: the impact of the deep economic recession on household formation and the availability of a growing number of good quality private rented sector dwellings. This overall trend was mirrored in the gradual increase and then reduction in the number of households accepted as statutorily homeless. However, this reduction was reversed over the next two years: the number of households presenting as homeless rose to approximately 20,150 in 2010/11 (a 12 per cent increase over two years) and the number accepted rose to almost 10,450 (17 per cent over the same period). It is very probable that as with the overall waiting list, pent-up demand could only be contained for so long and in the end


39


found its expression in rising homelessness. Since 2010/11 the pattern has been less clear. The number of households presenting has declined: in 2013/14 only 18,862 households presented as homeless. However, the number of households accepted as statutorily homeless fell to 9,021 in 2011/12, before rising again in 2012/13 to 9,878 and then falling again by 2.3 per cent to 9,649 in 2013/14. Preliminary figures for 2014/15 indicate that both the number presenting and being accepted as homeless rose in 2014/15 (to around 19,600 and 11,000 respectively). However, at a local level the above mentioned “Housing Solutions” approach is helping to reduce the number of homeless cases, by finding suitable alternative accommodation for potentially homeless households, without necessarily joining the waiting list for social housing. The importance of the causal factors in homelessness has changed little in terms of their rank order. For those households accepted as statutorily homeless during 2013/14, the biggest single cause – as in 2012/13 - was ‘accommodation not reasonable’ (2,782; 29%) reflecting to a large extent the ongoing ageing of the tenant profile. Sharing breakdown/family dispute was the second most important cause: 1,673 (17% of the total). The third largest category continued to be loss of (private) rented accommodation: 1,307 (13%). However, the relative importance of the causes of homelessness has continued to change. The number accepted because of sharing breakdown/family dispute has dropped by a further 6 per cent – linked, at least to a certain extent, to the economic consequences of splitting up in a challenging economic climate. The number accepted because of unreasonable accommodation rose by a further 9 per cent. However, unlike in the previous financial year when the number of households accepted as homeless because of loss of (private) rented accommodation rose significantly, in 2013/14 the figure remained almost unchanged, indicating that the difficulties faced by tenants and landlords as a result of the housing market downturn and the introduction of Housing Benefit reforms have at least not increased significantly (see Chapter 3). More than half (54%) of all households who presented in 2013/14 were single people, almost half (45%; 4,588) of whom were single males aged 26-59 (24% of the overall total). Families with children continued to account for around one third (5,870; 31 per cent) of those presenting as homeless.

The Net Stock Model Since 1994 the Housing Executive has used a Net Stock Model to estimate the need for new social housing at the Northern Ireland level. The model provides a starting point for developing the Social Housing Development Programme. It estimates the total extra number of new social dwellings required over a 10 year period based on a combination of demographic (e.g. household projections) and housing stock information (e.g. housing starts, demolitions and vacancy rates). The model assumes that most dwellings constructed in Northern Ireland will continue to be for the private sector and that the average annual rate of construction for the model’s ten year period will be approximately the same as the rate that prevailed during the previous 10 years. The residual requirement – the difference between housing need in total and construction for the private sector – equates to the projected need for social housing. The most recent model was produced in November 2014 as part of a wider research study12, and was based on the 2008-based household projections – modified to take account of 2011 Census information – and the most recent housing stock data. RSM McClure Watters in association with Paris, C., Palmer, J. and Williams, P. (2014) Demographic Change and Future Housing Need in Northern Ireland, Report to the NIHE.

12

40


However, given the cumulative backlog (the difference between what was needed and what was actually delivered) of more than 8,000 that developed between 2001 and 2011 (now reflected in the continuing high levels of housing need as recorded by the waiting list for social housing) as well as the expected ongoing lower rate of private sector new build over the next 3-5 year period, it is considered appropriate to continue to have an annual target of 2,000 new social dwellings for the next five year period.


On the demand side, this most recent iteration of the model envisages a lower rate of household formation (approximately 8,000 per annum) based on more recent data which emerged from the 2011 Census, compared to the previous 2008-2018 version of the model (8,300 per annum). However, the authors of the report were aware that the rate of household formation in the model would have to be reduced further once new household projections became available in March 2015. On the supply side a continuing low rate of new dwelling construction has reduced estimated private sector output from 9,200 per annum to 8,300 per annum although the effect of this in the model is reduced by a lower number of demolitions and a lower vacancy rate in new private housing to give an annual ongoing requirement for 1,500 new social dwellings for the period 2011-2021, compared to 1,200 for the period 2008–2018 (Table 4).

One of the key recommendations emerging from the Demographic Change and Future Housing Need in Northern Ireland report, was that the model should be re-calibrated to take on board the 2012-based household projections. These projections published in March 2015 (see p.35) envisage a more significant fall in the rate of household formation than projected by the research team. The process of re-calibrating the model is now underway. Table 4: Net Stock Model, 2011-2021 Projected Households (000) Extra Demand 2011-2021 New Households

79.2

Concealed Households

5.0

Temporary Accommodation

1.4

Total Extra Demand

85.6

Extra Supply 2011-2021 New Private Output

83.3

Less Net Demolitions, Conversions and Closures

(3.0)

Less 5% Second Homes

(4.1)

Less 5% Vacancy in New Private Housing

(4.1)

Total Extra Supply

72.1

Social Housing Needed 2011-2021 Deficit

13.5

Plus 2% Vacancy in New Social

0.3

Total Needed

13.8

Total Rounded and Allowance for Other Factors

15.0

Total Per Annum

1.5

Source: RSM McClure et al, November 2014


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Characteristics and Condition The 2011 House Condition Survey provides the most recent picture of the characteristics and condition of Northern Ireland’s housing stock. In 2011 there were approximately 760,000 dwellings in Northern Ireland – an increase of 55,000 (7%) over the period since 2006.

Dwelling Tenure 61.7% - The proportion of dwellings (470,000) in the owner occupied sector (66.5% [470,000] in 2006) 16.5% - The proportion of dwellings (125,000) in the private rented sector (11.5% [125,000] in 2006) ➥➥ If vacant properties, whose tenure when last occupied was private rented, are included, the figure for 2011 rises to 144,500 (19%) ➥➥ Since the mid-2000s the number of sales to sitting tenants in social housing declined dramatically. This together with a higher rate of construction of new social housing meant that after years of decline, the number of social dwellings started to grow again. The 2011 survey confirmed that there were approximately 111,000 occupied social dwellings. By 2015 the overall social stock has increased to almost 120,000 (see Chapter 4).

Dwelling Age 12% - The proportion of dwellings built before 1919 (16% in 2006) 40% - The proportion of dwellings built after 1980 (30% in 2006)

Dwelling Type The proportion of dwellings that are: Terraced housing: 28% Semi-detached houses: 22% Detached houses: 21% Bungalows: 21%

Unfitness 4.9% (32,000): the rate of unfitness (and the number of dwellings) in Northern Ireland’s housing stock (2.4% in 2009) In 2001 the rate of unfitness in Northern Ireland’s housing stock was 4.9 per cent (equating to approximately 32,000 dwellings). By 2006 the rate of unfitness had fallen to 3.4 per cent and to only 2.4 per cent (17,500 dwellings) by 2009. The 2011 House Condition Survey showed that the rate of unfitness had actually risen once again. In 2011 approximately 35,000 properties (4.6 per cent of all properties) were deemed to be unfit. For statistical reasons it is important not to over-emphasise the apparent doubling in the number of unfit properties within the space of two years. However, the survey does provide a clear signal: that the long period of steadily improving housing conditions in Northern Ireland may not continue. Unfitness is concentrated in the private sector, and particularly in privately owned vacant properties. Out of a total of 35,200 unfit properties, approximately 28,000 (80%) of these were vacant: 18,700 (53%) were in the owner occupied sector

42


Figure 5: Unfitness in Northern Ireland by District Council, 2011


when last occupied and 6,700 (19%) of them in the private rented sector. Using a logistic regression model developed by the Building Research Establishment in partnership with the Housing Executive and NISRA it was possible to disaggregate the overall rate of unfitness for Northern Ireland to District Council level. Fig. 5 illustrates the results of this modelling work and shows that the overall geographical pattern of unfitness revealed by the 2001 and 2006 surveys has remained broadly the same. Higher levels of unfitness are characteristic of more rural District Councils, particularly those located in the South-West of Northern Ireland. The highest levels of unfitness (7% or more) are to be found in Fermanagh, Omagh, Dungannon, Cookstown, Magherafelt and Larne. District Councils around Belfast and in the North-West have lower rates of unfitness.

Government Indicators Modelling work undertaken by the Building Research Establishment in partnership with the Housing Executive on the basis of data from the 2011 House Condition Survey has provided the following figures on Government Indicators of housing quality:


43


Decent Homes Standard In 2011, 11 per cent (86,600) of all dwellings failed the Decent Homes Standard. This represents a further improvement from the 15 per cent (112,000) which failed in 2009 and mainly reflects the large numbers of dwellings receiving more efficient oil or gas central heating. More than two-thirds (67%) of dwellings which failed the Decent Homes Standard did so on the basis of the thermal comfort criterion. The rate of non-decency varied considerably by tenure: ➥➥ it was highest for vacant dwellings (57%; 38% in 2009); ➥➥ four per cent of social housing and 10% of privately rented properties failed the Decent Homes Standard (compared to 15% and 17% respectively in 2009); and ➥➥ only eight per cent of owner-occupied properties failed the standard. As in the case of unfitness, additional modelling work undertaken in partnership with the Building Research Establishment and NISRA’s Census team has enabled these Northern Ireland level figures to be disaggregated to District Council Level. Not surprisingly a similar pattern emerges, although given the greater importance of energy efficiency to the Decent Homes Standard the failure rates are much higher. Fermanagh, Cookstown and Magherafelt recorded the highest rates of failure (15-16%), but fairly high rates were also recorded in Larne, Belfast, Down, Armagh, Dungannon and Omagh (see Fig. 6). Figure 6: Decent Homes Standard in Northern Ireland by District Council, 2011

44


The Housing Health and Safety Rating System was developed as a means of evaluating the potential effect of any design issues/faults on the health and safety of a property’s occupants, visitors or neighbours. It emphasises the potential effect of hazards rather than the existence of faults, but allows faults to be recorded and assessed for their potential to cause harm. In 2009, 10 per cent of all dwellings had Category 1 hazards13, half the proportion (20%) in 2009. The proportions with Category 1 hazards were highest in vacant properties (55%) and in dwellings built before 1919 (36%). The proportions were lowest in social housing (2%) and in the most modern dwellings built since 1980 (2%).

Vacant Properties The 2011 Census recorded a figure of 44,000 vacant properties, a significant increase over the figure of 31,600 recorded by the 2001 Census. The 2011 House Condition Survey estimated a higher figure of approximately 55,000. This apparent discrepancy would appear to reflect attempts by Councils to maximise their income from rates in expectation of the introduction of full rates for vacant properties from November 2011 onwards. This new policy has also had the unintended consequence of making the LPS database unsuitable for establishing the level of vacancy in Northern Ireland as there is little incentive for property owners to inform Rates Collection that a property has become vacant. The most reliable sources for vacancy levels at the local level in Northern Ireland must therefore be the 2011 Census and the 2011 House Condition Survey. The next House Condition Survey in 2016 will provide an updated picture.


Housing Health and Safety Rating System

Nevertheless analysis of the 2011 House Condition Survey data on vacant properties provides some important insights into the issue. It is very unlikely that the overall patterns set out below have changed significantly in the interim. Between 2006 and 2011 the number of vacant properties in Northern Ireland continued to rise. In 2011 there were an approximately 55,000 vacant properties at any one time in Northern Ireland, 7.2 per cent of the stock. This compares to a figure of 44,000 (5.9%) in 2009 and 40,000 (5.7%) in 2006. A high vacancy rate is particularly evident in the private rented sector, where some 19,000 properties (13%) are vacant: a rate which is almost double the rate for the stock as a whole. In the owner-occupied sector the vacancy rate is 6 per cent, while in the social sector it is lower still. However, it is important to emphasise that the vast majority of vacant properties are part of the normal turnover of properties in the private sector. Table 5 summarises the results of secondary analysis of properties recorded as vacant in the 2011 House Condition Survey database. The analysis begins with the total estimated number of dwellings which are vacant in Northern Ireland at any one point in time. The HHSRS provides a means of rating the seriousness of any hazard arising from a defect in a dwelling. The scoring procedure uses a formula to generate a numerical score for each of the hazards identified at a property, based on the likelihood of an occurrence which could result in harm to a vulnerable person and the likely health outcomes or harms that would result from the occurrence. Scores can range from 0 to more than 5,000, and a score of 1,000 or more represents a ‘Category 1’ hazard.

13


45


It reduces this number by separating out those awaiting demolition, those undergoing extensive modernisation, those being used for other purposes and those where the resident is absent for a lengthy period of time. This reduces the total to 28,900, a number which is reduced further by excluding dwellings which have been empty for less the six months, vacant holiday homes and unfit properties in isolated rural areas, which are very unlikely to be utilised as a dwelling again. The analysis estimates, therefore, that approximately 12,800 properties could be brought back into use, although this would be further reduced to 9,400 if all unfit properties are excluded (Table 5). Table 5: Vacant Properties Analysis, 2011 Category/Status

No. of Vacant Properties

Total vacant private sector dwellings

48,600

Awaiting demolition

(3,200)

Being modernised

(8,300)

Being used for another purpose (e.g. storage/office)

(2,500)

Other (resident in hospital, abroad etc.)

(5,700) 28,900

Less than 6 mths vacant

(12,900) 16,000

Vacant holiday homes

(600)

Isolated rural vacant unfits

(2,600)

Could be brought back into use

12,800

Remaining vacant unfits

3,400

Excluding all unfit dwellings

9,400

Source 2011 House Condition Survey

The Department for Social Development (DSD) launched its Empty Homes Strategy in September 2013 with the overall aim of ensuring that the number of empty homes in Northern Ireland is kept to a minimum and to identify new opportunities to encourage owners to bring them back into use. A tripartite approach was adopted, involving the DSD, the Housing Executive and two housing associations (Apex and Clanmil) with access to £13.9 million Get Britain Building Funding and Financial Transaction Capital. The Housing Executive established an Empty Homes Unit in January 2014; subsequently the issue of a leaflet to 550,000 ratepayers and the launch of a website resulted in 1,200 empty homes being reported. However, difficulties in identifying the owners of these properties, the absence of additional government funding and the lack of a data sharing protocol with Land and Property Services have meant that progress has been limited. However, this latter issue is to be addressed by the DSD as part of the next Housing (Amendment) Bill scheduled for late autumn 2015.

46


As part of the Home Energy Conservation Act (1995), the Housing Executive was designated as Northern Ireland’s Home Energy Conservation Authority. This role requires the Housing Executive to identify practicable, cost-effective measures that can be applied to residential accommodation (irrespective of tenure), with the aim of significantly improving the energy efficiency of the entire housing stock. The key objective was to achieve a 34 per cent reduction in the energy consumption of the dwelling stock against the 1996 baseline. Although no deadline was set, substantial progress was expected with a 10-year time frame. The Northern Ireland House Condition Survey is the single most comprehensive source of information on the energy-related characteristics of the housing stock. Successive surveys have shown that:


Energy Conservation and Fuel Poverty

➥➥ The energy efficiency of the stock improved by 20 per cent in the decade from 1996 to 2006, and by 2011 the overall improvement was 22.5 per cent.14 This progress has been mainly due to fuel switching and insulation programmes. By 2011, almost all dwellings (more than 99%) had full central heating and the most popular fuel sources were oil (68%, rising to 75% if homes with dual heating systems are included) and natural gas (17%). ➥➥ The average SAP (09) rating calculated for dwellings in Northern Ireland increased from 35 in 1996 to 54 in 2006. By 2011, the average rating had risen further, to 60. The SAP (Standard Assessment Procedure) measures the energy efficiency of individual dwellings on a scale of one to 100, where one is extremely poor and 100 is excellent. The improvement represents recurrent savings of 2.5 million tonnes of carbon dioxide per annum over 1996 levels. ➥➥ Around one fifth (21%) of dwellings had no wall insulation in 2011. The proportion was significantly lower than in 1996 (52%), but virtually unchanged from 2006 (22%). Many of the dwellings that have no wall insulation are of solid wall construction and cannot avail of cavity wall insulation. ➥➥ In 2011, the vast majority of dwellings that had lofts (96%) had loft insulation; the proportion had increased from 87 per cent in 1996 and 95 per cent in 2006. More than half (57%) of dwellings had up to 150 mm of loft insulation, while 40 per cent had more than 150 mm. ➥➥ In 1996, only around one quarter (24%) of dwellings had full double glazing. By 2006, the proportion had increased to 68 per cent, while the latest (2011) figures showed that more than four fifths of dwellings (81%) had full double glazing and a further 12 per cent were partially double glazed.

Fuel poverty A household is considered to be in fuel poverty if, in order to maintain an acceptable level of temperature throughout the home (21oC in the living room and 18oC in other occupied rooms), more than 10 per cent of its income would have to be spent on all household fuel. The three main causes of fuel poverty are poor thermal efficiency of dwellings, low household income and high fuel prices. Changes in the energy efficiency of the housing stock are measured by the BRE Domestic Energy Model (BREDEM) using Northern Ireland House Condition Survey data. The model calculates the energy use and fuel requirements of dwellings, based on their characteristics.

14


47


The baseline figure for fuel poverty in Northern Ireland was calculated using 2001 House Condition Survey data. At that time, one third of households (33%; 203,250) were estimated to be in fuel poverty. The model used to calculate the rate of fuel poverty was updated between 2001 and 2006. On the basis of this revised model, 226,000 households in Northern Ireland (34%) were found to be in fuel poverty in 2006, compared with a reworked figure of 27 per cent in 2001. The most recent published figures, modelled using data from the 2011 House Condition Survey, showed that the overall rate of fuel poverty (42%; 294,200) was higher in 2011 than in 2006, but slightly lower than in 2009, when it peaked at 44 per cent (302,300 households). The general increase in the rate of fuel poverty since 2006 has been mainly the result of rising fuel prices, and would have been much more severe had it not been for improvements to the energy efficiency of the housing stock. The effects of investment in energy efficiency were most apparent in the social rented sector, in which both the number and proportion of households in fuel poverty fell substantially between 2009 and 2011 (from 56,500 to 43,900, and from 51% to 40% respectively).

Fuel Poverty Strategy The Department for Social Development’s most recent fuel poverty strategy, Warmer Healthier Homes, was published in 2011. The strategy targets available resources on those vulnerable households most in need of help, with the core long term goal of eradicating fuel poverty. The Affordable Warmth (formerly Warm Homes) Scheme and boiler replacement grant are key parts of the strategy, which focuses on removing energy inefficiency as a primary cause of fuel poverty. DSD action to tackle fuel poverty also includes area-based pilot schemes for affordable warmth and the Housing Executive’s heating replacement scheme.

Warm Homes Scheme The Warm Homes Scheme supported owner occupiers and private landlords in the provision of insulation and heating measures to improve energy efficiency for well over a decade. During 2013/14 the scheme, which was funded by the DSD and administered by the Housing Executive, funded 7,904 insulation measures and 814 heating replacements in private homes, at a cost of almost £12.6 million. Following an independent review of fuel poverty in Northern Ireland and further research including two pilot schemes, the DSD launched a consultation, From Fuel Poverty to Achieving Affordable Warmth in February 2014. The consultation set out proposals for a new approach to assisting those households most affected by fuel poverty in Northern Ireland, involving a partnership between the DSD, University of Ulster (which carried out the fuel poverty review and pilot research), district councils and the Housing Executive. The main proposed changes were: ➥➥ To move away from the self-referral format of the Warm Homes Scheme towards a largely targeted approach; and ➥➥ To set an income qualification threshold instead of using social security benefits as a passport.

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Affordable Warmth Scheme The new scheme for addressing fuel poverty in the owner occupied and private rented sectors came into effect from April 2015. The Affordable Warmth Scheme, which is being delivered on behalf of the DSD by local Councils and the Housing Executive, is targeted at areas where there are concentrations of fuel poverty and at households with income of less than £20,000 per year. Over the coming three years, council staff will make contact with households considered to be most affected by fuel poverty and invite them to complete a short questionnaire to determine their eligibility. Eligible households will be referred to the Housing Executive, which will inspect the property to determine what energy efficiency measures are needed.


Responses to the consultation were generally positive, and plans for implementation of the new Affordable Warmth Scheme progressed during 2014/15. The Warm Homes Scheme formally closed on 31 March 2015.

A range of measures will be available under the Scheme, many of which were also available through the Warm Homes Scheme. In order to maximise energy efficiency gains, activity under the Affordable Warmth Scheme will be prioritised in the following order: Priority 1: Insulation/ Ventilation/ Draughtproofing

➥➥ Installation/topping up of loft insulation to 275 mm ➥➥ Roof/loft/eaves ventilation ➥➥ Provision of hot water cylinder jacket ➥➥ Draught proofing of doors/windows ➥➥ Installation of cavity wall insulation ➥➥ Removal and replacement of ineffective cavity wall insulation.

Priority 2: Heating

➥➥ Provision of natural gas or oil central heating where no central heating exists ➥➥ Conversion of solid fuel/LPG/economy 7 to natural gas or oil ➥➥ Conversion of economy 7 to high efficiency electrical storage system ➥➥ Boiler replacement/system upgrade for householders over 65, or who have a child under 16 years of age, or who receive disability living allowance and where an existing central heating boiler is at least 15 years old

Priority 3: Windows

➥➥ Replacement of single glazed windows

Priority 4: Solid wall measures

➥➥ Provision of solid wall (internal/external) insulation.

➥➥ Repair or replacement of double glazed windows that are defective


49


The scheme’s grant limit is £7,500, with the exception of solid wall properties, where solid wall insulation is required. In such cases the grant limit will be £10,000. If the cost of providing the relevant measures exceeds the grant limit, home owners may still avail of measures up to the grant limit and contribute the balance of the costs from their own resources. In order to avail of the scheme, private landlords must contribute 50 per cent of the total cost of energy efficiency improvements to the property.15

Boiler Replacement Scheme The Department for Social Development’s boiler replacement scheme, which is administered by the Housing Executive and part-funded by the European Sustainable Competitiveness Programme for Northern Ireland, was introduced in September 2012. It was due to come to an end on 31 March 2015, but the availability of additional funding meant that the scheme has now been extended for a further year. It is open to owner occupiers whose household income is less than £40,000 and who have an inefficient boiler that is at least 15 years old (and, in the case of gas boilers, where the gas connection to the property was made at least 15 years ago). A grant of up to £1,000 (depending on income and the work being carried out) can be made available to eligible households towards either: ➥➥ Replacement of an inefficient boiler with a more energy efficient condensing oil or gas boiler; ➥➥ Switching from oil to gas; or ➥➥ Switching to a wood pellet boiler. By March 2015, a total of 18,500 boilers had been replaced since the commencement of the scheme, with the work carried out by more than 2,000 installers.

Cavity Wall Insulation Research In late 2012, the insulation industry suggested that insulation installed in homes in the 1980s and 1990s may no longer be fit for purpose. With concerns raised by the DSD and a number of MLAs, the Housing Executive commissioned the South Eastern Regional College to examine 206 properties to assess the performance and effectiveness of existing cavity wall insulation. The Housing Executive will assess the findings, along with those of the stock condition survey being undertaken on behalf of the Housing Executive by Savills (see Social Housing chapter), to determine if a policy response is required in future maintenance schemes.

Other initiatives In the social sector, the housing associations continue to construct new dwellings to high energy efficiency standards, while investment in heating conversions, solar photovoltaics (solar PV) and other renewable energy projects helps improve the energy efficiency of Housing Executive-owned dwellings. The Housing Executive has also sponsored or participated as partner in a number of pilot and research projects, including two which centre on the difficult issue of insulating solid wall properties. 15

50

Where works exceed the grant limit, the maximum payable will not exceed 50% of the grant limit.


Full details on energy efficiency measures being undertaken in the owner occupied, private rented and social housing sectors are included in the Housing Executive’s Home Energy Conservation Report (2014), which is available to download from the Housing Executive website.



More broadly, progress in developing Northern Ireland’s natural gas network has continued, with a licence competition launched by the Utility Regulator to develop the gas network into counties Tyrone and Fermanagh. There has been a spike in demand for solar PV, as a result of incentive payments, guaranteed for 20 years, and in December 2014 the Renewable Heat Incentive (RHI) was extended to domestic customers. The RHI scheme, which is administered by the Department of Enterprise, Trade and Investment (DETI), provides long term financial support for those wishing to switch from conventional heating to renewable heating solutions such as biomass, heat pumps and solar thermal. Domestic customers will be able to avail of upfront payments plus tariff-based payments paid annually over a sevenyear period.

51


Key Issues and Strategic Perspective The world economy appears to have entered a period of slightly lower growth reflecting, on the one hand, an acceleration in the advanced economies but on the other a slowdown in emerging markets and developing economies. In the advanced economies growth is projected to be stronger in 2015 compared to 2014, supported by lower oil prices. In the USA, economic recovery was stronger than expected during 2014, although there was a significant slowdown in the final quarter, and this lower rate of growth has continued into Q1, 2015. The euro area economy grew overall supported by lower oil prices and depreciation of the euro, but this average disguises significant differences in performance. Ongoing uncertainty surrounding the position of Greece in the euro area and the ramifications of a “Greek exit” as well as high levels of Government and household debt, still pose significant risks to the economies of the UK and the Republic of Ireland. In 2014, the UK economy grew by 2.6 per cent, the highest rate of all the leading G7 industrial economies and unemployment fell sharply. In March 2015, against this background, the Chancellor presented a fiscally neutral budget and reaffirmed the Government’s commitment to deficit reduction Northern Ireland’s economy is set to grow by 1.7 per cent in 2015, but the pace of recovery is lagging significantly behind other parts of the UK, and Northern Ireland remains the poorest performing region. During the first quarter of 2015, economic news has been mixed, with a significant rise in the rate of unemployment and the expectation of substantial reductions in public expenditure. In addition, the 60,000 households who continue to be in a position of negative equity must be seen as an ongoing drag on the Northern Ireland economy. Northern Ireland’s demography is continuing to change. Its age profile is becoming older: the number aged 85 and over in particular rose by 35 per cent to 31,400. Average household size has continued to fall, although at a lower rate than previously envisaged. New, significantly lower, household projections published in March 2015 have very important implications for housing need/demand and therefore supply. The longer term trend towards more single person households and a greater number of older person households, however, will continue, resulting in a sustained demand for smaller accommodation. This demand is likely to be accelerated in the social sector if/when the spare room subsidy (more commonly known as the “bedroom tax”) is introduced. As the population continues to age, support packages funded by Supporting People will continue to play a vital role in helping older people, or people with a disability, to remain in their own homes for longer. The numbers of applicants on the waiting list for social housing has continued to fall (to approximately 39,300 in March 2015) but the numbers in “housing stress” (more than 22,000) rose again over the past year. Both the number of households

52


The latest iteration of the Net Stock Model was completed in November 2014. It indicated an ongoing annual requirement of 1,500 new social dwellings for the period 2011 to 2021, reflecting both lower expected levels of household formation and a significantly lower rate of new construction for the private sector. The annual requirement has been set at 2,000 to reflect the significant under-provision relative to housing need which developed since 2001 and the challenging market conditions, which make it unlikely that there will be a significant upturn in the rate of construction by the private sector in the next three years. However, these figures are being reviewed in the light of the significantly lower rate of household formation which has become apparent since the sharp economic downturn in 2007/08. The rate of fuel poverty in Northern Ireland reduced between 2009 and 2011 to 42%, reflecting the considerable investment in energy efficiency measures in the social sector in particular. Estimates indicate that this figure rose again between 2011 and 2014, before falling back to 2011 levels following the sharp reduction in oil prices. Reducing fuel poverty continues to be a challenge, for even if energy prices remain relatively low, real household incomes have only recently started to show signs of rising again. Continued investment in improving the fabric of dwellings through measures such as more efficient heating systems and double glazing is important to ensure that a lower rate of fuel poverty is achievable.



presenting and accepted as statutorily homeless rose in 2014/15, although “housing solutions” based on greater use of the private rented sector is starting to bear fruit.

53

Chapter

2

The Owner Occupied Sector “Despite the recent increase in house prices there has been no significant deterioration in affordability…”

The Owner Occupied Sector 56

The Owner Occupied Sector: Key Figures 2001

2006

2011

TOTAL STOCK

432,300

468,900

469,100

Urban

272,200 (63%)

307,600 (66%)

314,230 (67%)

Rural

160,100 (37%)

161,300 (34%)

154,800 (33%)

Pre-1919

78,800 (18%)

69,500 (15%)

46,700 (10%)

1919-1980

234,100 (54%)

255,400 (54%)

377,627 (47%)

Post-1980

121,400 (28%)

143,900 (31%)

219,100 (43%)

DWELLING AGE

HOUSING CONDITIONS Unfitness (rate)

12,000 (2.8%)

7,500 (1.6%)

4,600 (1.0%)

Non-Decent Homes (rate)

101,100 (23%)

95,700 (20%)

38,300 (8%)

Fuel Poverty (rate)

97,900 (23%)

148,000 (32%)

190,000 (41%)

New housing construction

10,418

13,955

5,913

Average house price (£)

86,754

174,178

139,800

Median advance:income ratio (FTBs)

2.36

3.19

3.20

Proportion of sales to FTBs

60

32

57

No. of NIHE sales

5,555

2,522

249


The owner-occupied sector had grown steadily during the second half of the twentieth century in Northern Ireland. Government policies, including tax relief on mortgage interest, reductions in “bricks and mortar” subsidies for the construction of new social dwellings, rent increases in the social sector and in particular, after 1979, the generous discounts to tenants in the social sector wanting to purchase their home, had all helped to promote this trend. Owner occupation continued to grow during the early years of the new millennium. Low interest rates helped to mitigate the growing gap between the income of the typical first-time buyers and rising house prices. However, the Global Financial Crisis of 2007/08 precipitated a ‘credit crunch’ and a concomitant steep economic downturn in Northern Ireland that ultimately led to a reversal of this longterm trend.


Introduction

Between 2006 and 2011 the proportion of the total housing stock in owner occupation fell from 66 per cent (469,000) to only 62 per cent (469,000). This reduction in the position of owner occupancy relative to the other tenures reflected a combination of higher unemployment and continued uncertainty in the labour market, high levels of personal debt and more cautious lending practices by banks and building societies. First time buyers, in particular, found it difficult to purchase their first home and chose to either remain in the parental home, return to the parental home (the so called “boomerang kids”) or to enter, or remain in, the private rented sector for longer periods. Since 2013, there have been signs that the owner occupied sector was once again becoming more buoyant, with more first time buyers entering the market, assisted by the re-emergence of higher (95%) loan-tovalue mortgages (and Help to Buy type schemes being run by a number of lenders), but it is unlikely that the underlying patterns of housing choice which have been established since 2007 will change for the foreseeable future. Northern Ireland is not exceptional in terms of a falling proportion of its stock in the owner occupied sector. The most recent English Housing Survey also recorded a fall in the proportion of households living in owner occupied homes. From a peak of 71 per cent in 2003 (when the equivalent figure in Northern Ireland was 73 per cent), it has fallen to 66 per cent in 2010/11 (the proportion of households living in owner occupied properties in Northern Ireland in 2010/11 was approximately 67 per cent).


57


New Housing The construction of new dwellings for the private sector in Northern Ireland reached a highpoint in 2006/07 when almost 14,000 new dwellings were started. Following the collapse in the market in 2007/08 there was a sharp downturn. In 2008/09 fewer than 5,500 new houses were started. A small upturn took place in 2009/10 (6,802), a level which was maintained in 2010/11 (6,881)16 However, there was a further significant downturn to 5,085 in 2011/12 and a further downturn in 2012/13 to less than 4,000. In 2013/14, the market showed signs of recovery and this was reflected in a figure of 4,415 new starts, a trend which continued into 2014/15 – when 5,252 new private dwellings were started, a 19 per cent increase on 2013/14 (Figure 7). Figure 7: New Housing Construction in the Private Sector, 2004/05 – 2014/15 16000 14000 12000 10000 8000 6000 4000 2000 0

2004/05 2005/06 2006/7

2007/8

2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Source: DSD, Housing Statistics 2013/14 and LPS.

Transaction Rates The sharp downturn in the construction of new dwellings after 2006/07 was reflected in the housing market by a parallel reduction in the number of completed house sales. Figure 8 illustrates that from a peak of more than 41,000 residential property sales in 2006 at the height of the boom, this figure fell steeply to approximately 11,600 in 2008 and remained at approximately this level until 2012 when the figure rose to more than 13,600. Since 2012, however, there has been a significant increase in the number of transactions. In 2014, there were more than 20,00017 and although this is still considerably below the figure of 30,000 which was typical in the pre-boom era, it is nevertheless a key indicator that the housing market is returning to normality.

Revised figures for starts and completions were published by LPS in March 2015, http:/www.dfpni.gov.uk/lps/index/aboutlps/publications_and_statistics/new-dwelling-statistics The figure for 2010/11 and subsequent years use these new figures. 17 Land & Property Services: Northern Ireland Residential Property Price Index, October-December 2014 16

58


Figure 8: NI: Residential Property Sales, 2005-2014 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

2005

2006

2007

2008

2009

2010

2011

2012

2013


A similar indication of a reviving market emerges from the Ulster University’s Quarterly House Price Index (for Quarter 4, 2014) which draws on a sample of more than 1,900 transactions, a figure which is 30 per cent higher than the equivalent quarter in 2013.

2014

Source: Land & Property Services, NI RPPI, October-December 2014


59


House Prices Nationwide’s house price index report for Q4, 2014 showed that as in 2013, in 2014 too, all regions of the UK experienced annual price increases. The average price for a dwelling for the UK in Q4, 2014 was £189,002, an increase of 8.3 per cent compared to Q4, 2013. However, “all regions [including Northern Ireland], except the North of England saw a slowing in annual price growth in the final quarter of 2014”18. The overall average rate of increase, however, conceals considerable regional variations. At one end of the regional scale, house prices increased over the year in London by 17.8 per cent, to reach £406,730, whereas at the other end of the scale, Wales recorded annual growth of only 1.4 per cent, to bring its annual average house price to £141, 631, and Yorkshire and Humberside recorded an increase of only 1.5 per cent (£142, 816). Northern Ireland continues to be the region with the lowest average house price (£120,685), but in 2014 it registered an annual increase of 8.1 per cent. A number of factors are behind this upturn in house prices: better underlying economic indicators (in particular significantly higher levels of employment), the effects of the Government’s Help to Buy Scheme, which has enabled firsttime buyers to access mortgage finance more easily and the shortage of supply, particularly in London and the South East of England. However, the North/South divide in property prices is continuing to widen, a trend which has been exacerbated by investors competing for high-end properties in central London. Ulster University’s mix-adjusted analysis of open market transactions gathered from a network of estate agents shows a similar picture for the performance of Northern Ireland’s housing market. It too records an increase of 8.1 per cent in the average annual house price between Q3, 2013 and Q4, 2014, although the weighted rate of annual increase is somewhat lower at 5.7 per cent, indicating that some of the growth represented by the simple arithmetic average reflects the differences in the mix of properties sold. The Ulster University’s index shows that in Q4, 2014 the average price of homes in Northern Ireland was £143,675. This is still approximately 43 per cent lower than the peak of £250,586 in Q3,2007 (Figure 9), but not only does the mix-adjusted quarterly rate of increase show a significant uptick (3.3%), more importantly for the first time since before the onset of the Global Financial Crisis in 2008, the average price for the year as a whole (£140,217 for 2014) is higher than the average price for the previous year as a whole (£131,204 for 2013 as a whole; a 6.9% increase).

Nationwide House Price Index, Q4, 2014, p.1.

18

60


260000

60

240000 40

220000 200000

20

180000 0

160000 140000

-20

Average House Price (£)

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q3 2010

Q2 2010

Q1 2010

Q4 2009

Q3 2009

Q2 2009

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Q2 2007

Q1 2007

Q4 2006

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Q3 2005

Q2 2005

Q1 2005

Q4 2004

Q3 2004

Q2 2004

100000

Q1 2004

120000 -40

Annual % Change

Source: University of Ulster, Quarterly House Price Index


Figure 9: NI: Average House Price, 2004-2014

Analysis by property type reveals some significant differences in the rate of price change (Table 6). All house types experienced an increase in average price over the year. However, two house types had much higher rates of increase: semidetached bungalows (17.6%) and apartments (13.3%). The increase in the price of apartments is particularly significant as apartment prices have tended to reduce in recent years rather than increase. Table 6: NI: Average House Prices and Annual Change by Property Type, Q4, 2014 Property Type

Q4, 2014 (£)

Annual Change %

Terraced Houses

83,153

+2.9

SD Houses

129,827

+3.6

Detached Houses

237,669

+6.7

SD Bungalows

103,486

+17.6

Detached Bungalows

157,241

+2.5

Apartments

108,912

+13.3

Source: University of Ulster, Quarterly House Price Index Report 121: Q4, 2014

Analysis by geographic region (Table 7) shows there were considerable regional disparities in house price movements between Q4, 2013 and Q4, 2014. At one end of the scale the average price in Coleraine/Limavady/North Coast rose by nearly 19 per cent and indeed nine out of the eleven house price regions in Northern Ireland showed increases. However, at the other end of the spectrum two regions showed annual declines over the year: Antrim/Ballymena (-4.7%) and Craigavon/Armagh (-12.4%). It is impossible to establish clearly the relative importance of local factors which account for these regional variations. However, this type of pattern is typical of a market which is still recovering from a major shock.


61


Table 7: NI: Regional House Prices Q4, 2013-2014 Average Price Q4, 2014 (£)

Average Price Q4, 2013 (£)

Annual Change (%) (unwted)

Belfast

156,712

136,830

+14.5

North Down

181,600

171,829

+5.7

Lisburn

159,842

143,491

+11.4

East Antrim

128,685

119,390

+7.8

Londonderry/Strabane

113,662

99,322

+14.4

Antrim/Ballymena

113,149

118,722

-4.7

Coleraine/Limavady/North Coast

147,712

124,361

+18.8

Enniskillen/Fermanagh/S Tyrone

124,678

116,828

+6.7

Mid Ulster

114,200

106,139

+7.6

Mid and South Down

136,314

125,456

+8.7

Craigavon/Armagh

100,706

115,002

-12.4

Northern Ireland (unweighted)

143,675

132,922

+8.1

Source: University of Ulster, Quarterly House Price Index Report 121: Q4, 2014

Land & Property Services (LPS) Residential Property Price Index launched in 2012 utilises information on all verified residential sales recorded by Her Majesty’s Revenue & Customs (HMRC) for stamp duty purposes. It uses a modelling approach to produce a standardised residential property price19 which reflects pure price change. As in the case of the Ulster University’s index it has adopted a mixadjusted approach which uses key property characteristics to control for differences in the mix of properties sold from quarter to quarter. It is Northern Ireland’s most comprehensive index, as it covers almost all dwellings sold, although this also has a disadvantage in that it includes, for example, a considerable number of distressed properties which are sold at auction at significantly below their capital valuation. Key findings from the LPS figures for Q4, 2014 show similar trends to Ulster University’s index, although the standardised price calculated by LPS is significantly lower than the Ulster University average price, largely for methodological reasons: ➥➥ Between Q4, 2013 and Q4, 2014 the standardised price of residential properties increased by 8 per cent to £109,342. ➥➥ Between Q3, 2014 and Q4, 2014 standardised residential prices increased by one per cent. Residential property prices continue to be less than half of their peak in Q3, 2007. The simple average price produced by LPS for Q4, 2014 is significantly higher (£125,129) than the standardised price, though still not as high as the Ulster University figure of £143,675.

19

62

The standardised price is defined as a hypothecated value based on a weighted combination of prices (e.g. 0.5% of a detached house in North Down, 4% of a terraced house in Belfast, etc. An index based on this is seen as providing a better measure of pure price change.


House price change 2015 Forecasting the rate of house price change for a twelve month period accurately is always difficult. Last year’s Review and Perspectives estimated that “house prices are likely to drift upwards by up to 5 per cent during 2014, although this rate will vary significantly between local housing markets”. In the event this proved to be fairly accurate as the above analysis has shown (a weighted increase of 5.7% with significant regional variations). Given the ongoing signs that economic growth will continue, and that mortgage lending is becoming easier to access, as well as continuing low levels of construction of new dwellings, it is likely that the average price for homes sold in Q4, 2015 will be around 5 per cent higher than in Q4, 2014. Once again there will be significant regional variations.



The Office for National Statistics (ONS) House Price Index shows a similar picture to the Ulster University index, although it is important to highlight that these are monthly figures based on mortgage-based sales for owner occupiers and therefore exclude an important part of the overall market: investment properties, which have been included in both the Ulster University and LPS surveys. The ONS mix-adjusted house price for Northern Ireland in December 2014 was £142,000 and represents a 4.9 per cent increase on the figure for December 2013.

63


Affordability in Northern Ireland Affordability in terms of the traditional house price to income ratios is no longer a significant issue in Northern Ireland. Figure 10 shows the proportion of properties sold in each price band between 2004 and 2014. In 2004, more than 50 per cent of all homes were sold for less than £100,000. At the peak of the housing boom in 2007 this proportion had fallen to almost zero. Since 2010 however, more than one third of all homes sold cost less than £100,000, although as the housing market has recovered and property prices have started to rise the proportion of homes being sold at under £100,000 has started to fall once again. In Q4, 2013 the proportion of homes had risen to 44 per cent, but by Q4, 2014 it had fallen to 37 per cent. Figure 10: NI: Proportion of Transactions by Price Band, 2004–2014 100 90 80 70 %

60 50 40 30 20